Question
Suppose that the marginal propensity to spend is 0.6 and there is a recessionary gap of 150 TL. Assume further that this is a closed
Suppose that the marginal propensity to spend is 0.6 and there is a recessionary gap of 150 TL. Assume further that this is a closed economy and that the marginal tax rate is 0.2. What fiscal policy would you recommend?
a.Contractionary fiscal policy; decrease government expenditures by 75TL or cut taxes by 150TL
b.Expansionary fiscal policy; increase government expenditures by 80TL or cut taxes by 60TL
c.Expansionary fiscal policy; increase government expenditures by 150TL or cut taxes by 75TL
d.Expansionary fiscal policy; increase government expenditures by60TL or cut taxes by 80TL
e.Contractionary fiscal policy; decrease government expenditures by 60TL or cut taxes by 80TL
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Macroeconomics Principles Applications And Tools
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
7th Edition
ISBN: 978-0134089034, 9780134062754, 134089030, 134062752, 978-0132555234
