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Explain the effects of the actions on equilibrium income

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Reference no: EM131168304

1. Explain the effects of the following actions on equilibrium income:

a. Government purchases rise by $30 billion.

b. Taxes fall by $20 billion.

Assume that the marginal propensity to consume is 0.75

2. When an economy is already at full employment, what is the outcome of expansionary fiscal policies to employment, inflation, real output and deficits (assuming no changes in tax rates)?

Reference no: EM131168304

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