MPC=0.75
MPS=1-0.75
=0.25
Multiplier=1/0.25
=4
Since Federal government has reduced tax by $10 million.
After the 3 rounds of the multiplier process Real GDP will be
In first round RGDP will increase by=MPC* change in taxes
=0.75*$10 million
=$7.5 million
In second round RGDP will increase by=MPC* change in taxes
=0.75*$7.5 million
=$5.625 million
In third round RGDP will increase by=MPC* change in taxes
=0.75*$5.625 million
=$4.218 million
Total change in the RGDP after 3 rounds of multiplier process=10+7.5+5.625+4.218
=$27.343 million
hence option b is the correct answer.
a sponsora de pensamente en el e n la mano dalam ales 3) Suppose that the...
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