In an open economy with a government, the marginal propensity to consume is 0.75, the income tax rate is 20%, and the marginal propensity to import is 0.10. If autonomous investment spending increases by $50 billion, the total equilibrium output will increase by $____ billion. (Enter a numerical value only)
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Consider two economies, A and B, that are identical in every way except for their tax policies and international trade patterns. Both economies have a marginal propensity to consume of 0.8. Economy A has a tax rate of 10% and a marginal propensity to import of 0.05. Economy B has a tax rate of 25% and a marginal propensity to import of 0.15. If the governments of both economies increase their spending by an identical amount, which economy will experience a larger increase in its total output, and why?
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Four open economies (A, B, C, D) have an identical marginal propensity to consume of 0.8. Their tax rates and marginal propensities to import are listed below. Match each economy to the correct rank of its spending multiplier, from largest (1st) to smallest (4th).
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In an open economy with a government, the marginal propensity to consume is 0.75, the income tax rate is 20%, and the marginal propensity to import is 0.10. If autonomous investment spending increases by $50 billion, the total equilibrium output will increase by $____ billion. (Enter a numerical value only)
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Fiscal Policy Intervention to Close an Output Gap
Supply-Side Assumption in the Multiplier Model