Problems 3. Draw the graph and label correctly Assume a simple closed economy, with an mpc equal to 0.75. The government has passed a balanced budget amendment. The economy goes into a recession, so the government increases government spending by 40 million to try to expand the economy. a. Calculate the change in output (AY) from the increase in government spending (AG). b. The balanced budget amendment requires the government to also raise taxes by 40 million. Calculate hange in output (AY) from the tax hike.

Problems 3. Draw the graph and label correctly Assume a simple closed economy, with an mpc equal to 0.75. The government has passed a balanced budget amendment. The economy goes into a recession, so the government increases government spending by 40 million to try to expand the economy. a. Calculate the change in output (AY) from the increase in government spending (AG). b. The balanced budget amendment requires the government to also raise taxes by 40 million. Calculate hange in output (AY) from the tax hike.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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