177 key graph p 178 15b reduction in consumption

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Unformatted text preview: el of GDP. Table 10-4 p. 177, Key graph, p. 178 $15B reduction in Consumption C+Ig+Xn+G C + Ig + Xn + 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.

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