Summary09 - CHAPTER 9 SUMMARY 1 When you get your paycheck...

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CHAPTER 9 SUMMARY: 1. When you get your paycheck, what is left over after the government takes out its various taxes? Your total income minus net taxes is called disposable income. This is what is left over after paying your taxes to the government and receiving any income transfers from the government. 2. How can the government pull the economy out of a recession? There are different policy tools at the government's disposal. One of them is called discretionary fiscal policy. This consists of changing government spending or taxes in order to influence the economy. 3. If the government increases spending in order to stimulate the economy, how much will the economy grow? Any given increase in government spending will cause real GDP to go up by more than the spending increase. This is known as the government spending multiplier. The value of the spending multiplier is given by 1/(1 - MPC). 4. There has been a lot of talk about cutting taxes lately. How will tax cuts affect the state of
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Summary09 - CHAPTER 9 SUMMARY 1 When you get your paycheck...

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