n each of the following cases, calculate the spending multiplier and determine the size and shift of each fiscal policy on the AD (aggregate demand) curve. a. Government increases spending by $4 billion in an economy with a MPW of 0.7 b. Government spending decreases by $2 billion in an economy with a MPC of 0.65. c. Government increases taxes by $3 billion in an economy with a MPW of 0.35 d. A $5 billion tax cut causes an initial increase in spending of $1.5 billion.
n each of the following cases, calculate the spending multiplier and determine the size and shift of each fiscal policy on the AD (aggregate demand) curve. a. Government increases spending by $4 billion in an economy with a MPW of 0.7 b. Government spending decreases by $2 billion in an economy with a MPC of 0.65. c. Government increases taxes by $3 billion in an economy with a MPW of 0.35 d. A $5 billion tax cut causes an initial increase in spending of $1.5 billion.
Chapter21: Fiscal Policy
Section: Chapter Questions
Problem 3SQP
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In each of the following cases, calculate the spending multiplier and determine the size and shift of each fiscal policy on the AD (aggregate
a. Government increases spending by $4 billion in an economy with a MPW of 0.7
b. Government spending decreases by $2 billion in an economy with a MPC of 0.65.
c. Government increases taxes by $3 billion in an economy with a MPW of 0.35
d. A $5 billion tax cut causes an initial increase in spending of $1.5 billion.
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