Amount expansionary-contractionary or ineffective

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Reference no: EM13836356

Assume an open, mixed economy (C + I + G + X = real GDP) and an MPS of .2 What is the multiplier?

If government spending (G) increases by $50B, how much will real GDP increase?

If taxes also increase by $50B, consumption (C) will fall by how much?

The result will be a $200B decline in real GDP. Was this policy of increasing government spending and taxes by the same amount expansionary, contractionary or ineffective?

Reference no: EM13836356

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