Question

Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase...

Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase GDP by 30 percent, and they want to change taxes and government spending by equal amounts, how much would government spending and taxes each need to increase?

Group of answer choices

$1,000

$300

$3,000

$750

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Answer : $3000

Increase in gdp = 10000*0.3= 3000

When government spending and taxes need to change by same amount budget multiplier is 1.

So government spending and taxes must increase by increase in gdp needed.

Add a comment
Know the answer?
Add Answer to:
Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
Active Questions
ADVERTISEMENT