Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by $100 billion. Calculate how much the government would have to spend to achieve this objective.

Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by $100 billion. Calculate how much the government would have to spend to achieve this objective.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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6)Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by
$100 billion. Calculate how much the government would have to spend to achieve this objective.

9)Calculate how much output would expand by if the government increased spending by $500 billion and financed
this spending by increasing lump-sum taxes by the same amount.

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