The economy is experiencing a $225 million inflationary gap. If the government decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC =0.9, what magnitude of tax change would be appropriate? 1) The economy is experiencing a recessionary gap of $30 billion. If the MPC=0.75, what government spending stimulus would you recommend to move the economy back to full employment? If the MPC=0.66
The economy is experiencing a $225 million inflationary gap. If the government decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC =0.9, what magnitude of tax change would be appropriate? 1) The economy is experiencing a recessionary gap of $30 billion. If the MPC=0.75, what government spending stimulus would you recommend to move the economy back to full employment? If the MPC=0.66
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 5SQP
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The economy is experiencing a $225 million inflationary gap. If the government decided to solve this
1) The economy is experiencing a recessionary gap of $30 billion. If the MPC=0.75, what government spending stimulus would you recommend to move the economy back to full employment? If the MPC=0.66
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