ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 5.11P
To determine
Amount by which government will have to increase its spending to achieve an increase in real
Introduction: The simple spending multiplier indicates how much the total spending increases, given a change in income. The spending multiplier is determined by the following equation:
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Students have asked these similar questions
Suppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The government wants to increase real GDP demanded to $19 trillion at the given price level. By how much would it have to increase government purchases to achieve this goal?
(Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion.
0.9
0.8
0.75
0.6
Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of the real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead if reducing its purchases, increased autonomous net taxes by $10 billion.
a. 0.9
b. 0.8
c. 0.75
d. 0.6
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