1) Suppose the MPC is 0.75 if the government increasesexpenditures by $200 billion how far does the economy grow? if thegovernment decreases taxes by $200 billion how far does the economy grow?
MPC = 0.75 and MPS equals to 1-MPC= MPS which is = 0.25
how would the 200 billion affect the economy by decreases of taxes by government?
2) If the MPS is 0.25 and the economy has a recessionary gapof $5billion, what is the size of the GDP Gap?