If the MPC is .75 and the federal government decreases taxes by $200 billion, how much...

Question

Question

If the MPC is .75 and the federal government decreases taxes by $200 billion, how much will real GDP be expected to increase?

Answer 1

Answer #1

Tax multiplier = mpc/(1-mpc) = 0.75/(1-0.75)= 3

Increase in real gdp = 3*200= 600

Answer 2

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