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Assume the Federal government determines expansionary fiscal policy is necessary to increase GDP by $400 billion. Also assume the marginal propensity to consume is .9
Assume the Federal government determines expansionary fiscal policy is necessary to increase GDP by $400 billion. Also assume the marginal propensity to consume is .9 and the multiplier is 10. The Federal government can accomplish their intended target increase in GDP by:
a. Increasing government spending by $40 billion
b. Decrease in government spending by $40 billion
c. Decreasing taxes by $40 billion
d. Increasing taxes by $40 billion
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