How large a tax cut would be needed to achieve same increase

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Reference no: EM13160032

Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession.

1. By how much would government spending have to rise to shift the aggregate demand curve rightward by $50 billion?

2. How large a tax cut would be needed to achieve the same increase in aggregate demand?

Determine one possible combination of government spending increases and tax increases that would accomplish the same goal.

3. Increase spending by $ billion and increase taxes by $ billion.

Reference no: EM13160032

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