Instead of increasing government spending by the amount you


Assume an economy is in recession with a MPC of 0.70 and there is a GDP gap of $300 billion. How much government spending must increase to eliminate the GDP gap? Instead of increasing government spending by the amount you calculate, what would be the tax cut required to achieve elimination of the GDP gap? Discuss how and why the spending multiplier and the tax multiplier are different?

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Microeconomics: Instead of increasing government spending by the amount you
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