Government increases both taxes and government purchases

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Suppose the government increases both taxes and government purchases by $10,000. Assuming that the marginal propensity to consume is 0.75, calculate the change in private saving, government saving, and total saving. Then draw a graph of the loan able funds market and show graphically what happens to the equilibrium interest rate and investment as a result of this balanced-budget change.

Reference no: EM13851318

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