Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.50. How much must the government cut its spending? Instead of decreasing government spending by the amount you calculate, what would be the effect of the government increasing taxes by this amount?
Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.50. How much must the government cut its spending? Instead of decreasing government spending by the amount you calculate, what would be the effect of the government increasing taxes by this amount?
Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government
Section: Chapter Questions
Problem 4QP
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Question #10 - Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.50. How much must the government cut its spending? Instead of decreasing government spending by the amount you calculate, what would be the effect of the government increasing taxes by this amount?
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