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Explain graphically the determination of equilibrium GDP for a private economy through the aggregate expenditures model. Assume the MPC is . 7 5 . Now
Explain graphically the determination of equilibrium GDP for a private economy through the aggregate expenditures model. Assume the MPC is Now add government purchases any amount you choose to your graph, showing its impact on equilibrium GDP Finally, add taxation any amount of lumpsum tax that you choose to your graph and show its effect on equilibrium GDP Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the sizes of the government purchases and taxes that you selected. Specify the level of GDP initially, the amount of Government Purchases, the amount of Taxes, and the ending amount of GDP if different from the original.
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