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March 25, 2017

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Wondering if I am doing this correctly??

If net taxes are increased by 3 billion dollars by how much would we expect real GDP to change?

My answer is: d) If the government increases taxes by 3 billion dollars we would use the tax multiplier to determine what the change in GDP would be. NT=-MPC/1-MPC=
3 *.78/1-.78= .78/, 22=4*3 = 12 billion increase in GDP.

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