If the equilibrium GDP is 4000 billion, full employment GDP is 5000 billion, marginal prosperity to consume is 0.80. How much and in what direction should government purchases be changed? If the government uses its taxation power to address the gap, how much should it change?

If the equilibrium GDP is 4000 billion, full employment GDP is 5000 billion, marginal prosperity to consume is 0.80. How much and in what direction should government purchases be changed? If the government uses its taxation power to address the gap, how much should it change?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2E

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Rules by which an authority (usually a government) imposes a financial obligation on individuals or organizations within its domain. Property or transactions can be taxed. While taxes are primarily intended to fund the operation of a government, many tax laws are created to encourage or discourage certain behaviors by citizens or companies.

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