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Suppose the government of a closed economy reduces taxes by $30 billion. There is no crowding out and the marginal propensity to consume is ?
Suppose the government of a closed economy reduces taxes by $30 billion. There is no crowding out and the marginal propensity to consume is ?
What is the initial effect of tax reduction on aggregate demand? What is the total effect of tax cut on aggregate demand?
How does the total effect of this $30 billion tax cut compare with the total effect of a $30 billion increase in government spending? Why?
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