Suppose the government implements an expansionary fiscal policy to finance e-toll gantries. Required ∆Y = R1 000, the marginal propensity to consume is 50% and the proportional tax rate is 40%. How much will government expenditure have to change to reach the required change in equilibrium income?
Suppose the government implements an expansionary fiscal policy to finance e-toll gantries. Required ∆Y = R1 000, the marginal propensity to consume is 50% and the proportional tax rate is 40%. How much will government expenditure have to change to reach the required change in equilibrium income?
Survey of Economics (MindTap Course List)
9th Edition
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Irvin B. Tucker
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 19SQ
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5
Suppose the government implements an expansionary fiscal policy to finance e-toll gantries. Required ∆Y = R1 000, the marginal propensity to consume is 50% and the proportional tax rate is 40%. How much will government expenditure have to change to reach the required change in equilibrium income?
a.
R699
b.
R800
c.
R1 000
d.
R1 200
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