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Increase in government expenditure and multiplier effect on equilibrium income.

Suppose an economy has an MPC of 0.75 and a tax rate of 20%. In the pure Keynesian model (fixed prices, no international sector), elucidate what is the expected effect on equilibrium output of a $100 million expansion in government expenditures?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M921188

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