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Unformatted text preview: el of GDP.
Table 10-4 p. 177, Key graph, p. 178
$15B reduction in
G C+Ig+Xn+G2 Tax of $20B reduces
Consumption by $ 15B if
MPC is .75 and reduces Real
GDP by $60B
490 550 Real GDP Again, when we add government effects (both purchase of goods and services and taxation)
we see the effect of the Simple spending multiplier. Balanced Budget Multiplier
Defined as Equal Increases in Government Spending and Taxation increase the
equilibrium GDP. In other words, when the government increases purchases of goods and
services but enacts a tax that pays for the extra spending,...
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This note was uploaded on 01/30/2014 for the course ECON 259 taught by Professor Geanakopolis during the Fall '10 term at Purdue University-West Lafayette.
- Fall '10