The President of Westeros hires you as an economic consultant. He is concerned that the output level in Westeros is too high and that this will cause prices to rise. He feels that it is necessary to reduce output by $10 billion. He tells you that the MPC in Westeros is 0.6. Which of the following would be the best advice to give to the Westeros president? A) reduce government purchases by $4 billion B) increase taxes by $10 billion C) reduce government purchases by $10 billion D) increase taxes by $2.5 billion

The President of Westeros hires you as an economic consultant. He is concerned that the output level in Westeros is too high and that this will cause prices to rise. He feels that it is necessary to reduce output by $10 billion. He tells you that the MPC in Westeros is 0.6. Which of the following would be the best advice to give to the Westeros president? A) reduce government purchases by $4 billion B) increase taxes by $10 billion C) reduce government purchases by $10 billion D) increase taxes by $2.5 billion

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 1TY

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