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I need help with (b) please Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession. a. By how much

I need help with (b) please

Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.

a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? $5billion(correct)

How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut = $6.25billion (correct)

b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt.

  • Increase government spending by $(how much) billion
  • Increase taxes by $(how much) billion

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