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Suppose an economy has an MPC of .8 and GDP is 60,000. The government wishes to increase GDP to 66,000 and intends to use only
Suppose an economy has an MPC of .8 and GDP is 60,000. The government wishes to increase GDP to 66,000 and intends to use only one fiscal policy tool - either government spending or taxation - to achieve this goal. a) By how much would government spending have to increase to yield the desired result over time? b) By how much would taxes have to be reduced to achieve the desired GDP result over time? c) Why are these answers above different? Show your work fully
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