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March 26, 2017

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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?

  • ECON - ,

    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.

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