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Change in equilibrium output and multiplier effect.

1) Use figure below to answer to the subsequent problem
From figure, indicate by using the numbers where the economy is located if the interest rate is below the equilibrium level and people are holding less money than they desire.

2) Suppose which the economy starts at equilibrium and the mpc = 0.75. Illustrate what would be the effect of a $300 increase in government spending once all the rounds of the multiplier process are complete?

3) Suppose which the economy starts at equilibrium and the mpc = 0.8. Illustrate what would be the effect of a 300 increase in taxes once all the rounds of the multiplier process are complete?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916951

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