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Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's marginal propensity to consume is .75. By
Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's marginal propensity to consume is .75. By how much is output likely to expand if the economy is operating in the horizontal range of its aggregate supply curve and there are no complications to this fiscal policy? How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion?
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