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10 July, 08:48

If the AD shortfall is $100 billion and the MPC is 0.8, Instructions: Enter your responses rounded to one decimal place. a. How large is the desired fiscal stimulus? $ 20 billion b. How large an income tax cut is needed? $ billion c. Alternatively, how much more government spending would achieve the target? $ billion

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  1. 10 July, 10:51
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    Multipier is 1 / (1-.8) = 5

    a. AD Shortfall/Multiplier = 100/5 = 20 billion

    b. FS/MPC = 20/.8 = 25 billion

    c. 20 billion
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Home » Business » If the AD shortfall is $100 billion and the MPC is 0.8, Instructions: Enter your responses rounded to one decimal place. a. How large is the desired fiscal stimulus? $ 20 billion b. How large an income tax cut is needed? $ billion c.
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