The hypothetical economy of Betania is in short-run macro equilibrium with RGDP equal to $5 trillion. Assume the MPC in this economy is .9. Suppose the government in Betania increases its purchases by $100 billion and finances this increase in spending by raising taxes by $100 billion.
Using an AS/AD graph, show the impact of this fiscal policy.
Explain what effects (if any) this equal increase in government purchase and taxes would have on price level and employment
Calculate the effect (if any) this equal increase in government purchases and taxes would have on RGDP.