An economy is experiencing a high rate of inflation. The government wants to reduce GDP by $80 billion to reduce inflationary pressure. The MPC is .8. By how much should the government raise taxes to achieve its objective?

An economy is experiencing a high rate of inflation. The government wants to reduce GDP by $80 billion to reduce inflationary pressure. The MPC is .8. By how much should the government raise taxes to achieve its objective?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Economics
An economy is experiencing a high rate of inflation. The government wants to reduce GDP by $80 billion to reduce
inflationary pressure. The MPC is .8. By how much should the government raise taxes to achieve its objective?
Multiple Choice
$9 billion
$16 billion
$20 billion
$12 billion

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