Assume that the short run equilibrium GDP is $4,000 billion and the potential GDP is $5,000 billion. The marginal propensity to consume is 0.8. [a] Would you classify this society more inclined to consume or save? Explain . [b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.
Assume that the short run equilibrium GDP is $4,000 billion and the potential GDP is $5,000 billion. The marginal propensity to consume is 0.8. [a] Would you classify this society more inclined to consume or save? Explain . [b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 6SQ
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Assume that the short run equilibrium
[a] Would you classify this society more inclined to consume or save? Explain .
[b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.
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