Question

Question 14 6 pts Assume the government cuts taxes by $250 billion. If the MPC is 0.8, what is the maximum potential impact on real GDP according to the simple Keynesian model? Real GDP decreases by $1,000 billion Real GDP decreases by $1.250 billion Real GDP increases by $1,000 billion Real GDP increases by $1.250 billion

Answer 1

tices real income (UDP) will increase Question 14 Hue MPC= 0.8 or b=0.8 Now, tau multplis 0.8 /-0.8 2-4 b DY AT (1-6) Govinnent cuts taus by $250 billion AT -- 250 or Hie, Ays-4 AT 2-4 (-250). ? $ 1000 thes Real GDP y inceans by $ 1000 billion tice the answn will be? Real aDP increases by $1,000 billion Question is 10 the MPC=0.90 or b=0.90 Now governnet enfuditre multiples AY ib Au I-b 7-0.90 thes Au= $40 billion. thee, Ays 1019 = 10X($40) $400 billion $400 billion by $400 Hice, the auswn will be increase; $400 CS Scanned with CamScanner