Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the economy's marginal propensity to consume is 0.9. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion?

Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the economy's marginal propensity to consume is 0.9. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 1WNG

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Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the
economy's marginal propensity to consume is 0.9. How does this discretionary fiscal policy
differ from a discretionary increase in government spending of $40 billion?

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