4. Assume the government cuts taxes and the marginal propensity to save is 0.4. a. Would this be considered expansionary fiscal policy or contractionary fiscal policy? b. If the tax cut was $1 billion, what would be the effect on real GDP? (Show your work.)
4. Assume the government cuts taxes and the marginal propensity to save is 0.4. a. Would this be considered expansionary fiscal policy or contractionary fiscal policy? b. If the tax cut was $1 billion, what would be the effect on real GDP? (Show your work.)
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 1P
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