Consider an economy that is operating atthe full-employment level of real GDP.Assuming the MPC is 0.90, predict the effect onthe economy of a $50 billion increase in governmentspending balanced by a $50 billionincrease in taxes.

Consider an economy that is operating atthe full-employment level of real GDP.Assuming the MPC is 0.90, predict the effect onthe economy of a $50 billion increase in governmentspending balanced by a $50 billionincrease in taxes.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 6SQP

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Question

Consider an economy that is operating at
the full-employment level of real GDP.
Assuming the MPC is 0.90, predict the effect on
the economy of a $50 billion increase in government
spending balanced by a $50 billion
increase in taxes.

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