Posted by Sam on .
If C = 500 + 3/4[GDP- 100], I = 300, G = 400, Xn =- 10 and full employment GDP is 210 less than current GDP, the proper action would be to increase taxes by?
Your MPC = 3/4, which means MPS=1/4. Do a little research on multipliers, especially the taxation multiplier. Hint: the taxation multiplier is (1/MPS)-1.
Take it from here.