5. Suppose the government of a closed economy reduces taxes by $20 billion, that there is no...

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5. Suppose the government of a closed economy reduces taxes by $20 billion, that there is no crowding out of investment, and that the marginal propensity to con- • 3 sume is 4.

a. What is the initial effect of the tax reduction on aggregate demand?

b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand?

c. How does the total effect of this $20 billion tax cut compare with the total effect of a $20 billion increase in government purchases? Wiry?

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Principles Of Macroeconomics

ISBN: 9780176591977

7th Canadian Edition

Authors: N. Mankiw, Ronald Kneebone, Kenneth McKenzie

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Question Posted: Sep 28, 2024 07:03 AM

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5. Suppose the government of a closed economy reduces taxes by $20 billion, that there is no...

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Principles Of Macroeconomics

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