4. If the marginal propensity to consume is .9, and the government provides a $40 billion...

Question

Question

4. If the marginal propensity to consume is .9, and the government provides a $40 billion tax cut, what would be the projecte

business economics

Answer 1

Answer #1

Tax multiplier = -MPC / 1-MPC

= -0.9 / 0.1

= -9 as the government is decreasing the taxes the value of the taxes will be -$40 billion.

This will increase the GDP by -40 x -9 = $360 billion.

Answer 2

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