Compute the total change in rgdp if government spending

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Reference no: EM13455921

1. What is the total change in RGDP if government spending increases by $700 million and the marginal propensity to consume (MPC) is 0.55? Show your work.

2. How much should the government change spending in order to close a $635 million inflationary gap if the MPC is 0.70? Should it increase or decrease spending? How much should it change taxes? Increase or decrease taxes?

Reference no: EM13455921

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