In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and firms cut investments by $4 billion, then equilibrium GDP will decrease by
In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and firms cut investments by $4 billion, then equilibrium GDP will decrease by
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 11SQ
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In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and firms cut investments by $4 billion, then equilibrium
Expert Solution
Step 1
Given the MPC = 0.90
Reduction in consumption = $5 billion
Decrease in investment = $4 billion
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