In explaining the bill to cut taxes, the President is quoted as saying, When people have more money, they can spend it on goods and services. a. In the IS-LM model, will a tax cut change the money supply in the economy? Why or why not? b. In the IS-LM mod
Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model. The MPC is .9 in each country.
1. How much is the government purchases multiplier for each country? 2. How much is the tax multiplier for each country? 3.
Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y T). Planned investment is 300, as are government spending and taxes. a. How much is equilibrium Y? (Hint: Substitute the values o