In an economy with income taxes if the marginal propensity


In an economy with income taxes, if the marginal propensity to consume were 0.8, the tax rate on income were 0.2, and the marginal propensity to import were zero: (a) How large an increase in government spending (with no change in taxes) would be required to raise equilibrium income by $2500 million? (b) How large a reduction in taxes would be required to raise equilibrium income by $2500 million? (c) Are your answers to (a) and (b) the same? Why or why not?

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Business Economics: In an economy with income taxes if the marginal propensity
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