Government accomplish this by increasing or decreasing taxes

Reference no: EM13696678

Suppose that the MPS in an economy is 0.4, and the government would like to decrease aggregate demand by $50 billion.

a) How could the government accomplish this by increasing or decreasing government expenditures?

b) How could the government accomplish this by increasing or decreasing taxes?

c) If the government decreased government spending by $100 billion and simultaneously decreased taxes by $100 billion, what would happen to aggregate demand? Give the exact amount of the increase or decrease.

Reference no: EM13696678

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