Assume the economy's marginal propensity to consume is 0.8. Suppose that businesses decrease autonomous investment. To avoid a recession, the government decreases autonomous tax of $5 billion such that total demand (C+I+G) remains unchanged (that is, AT = -5). How much did autonomous investment decrease? a. $4 billion b. $5 billion c. $8 billion d. $20 billion e. $25 billion

Assume the economy's marginal propensity to consume is 0.8. Suppose that businesses decrease autonomous investment. To avoid a recession, the government decreases autonomous tax of $5 billion such that total demand (C+I+G) remains unchanged (that is, AT = -5). How much did autonomous investment decrease? a. $4 billion b. $5 billion c. $8 billion d. $20 billion e. $25 billion

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 4SQ

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