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Posted: July 9th, 2023

Assuming that the economyâs MPC is 2/3 and that the government

Assuming that the economyâs MPC is 2/3 and that the government spending increases by $20 billion, what would be the impact on the equilibrium level of GDP?If the economyâs MPS is .2, what is the multiplier?Given the following table that delineates income and consumption levels, calculate the MPC.Income (Y)Consumption (C)$100 Billion$160 Billion200240300320400400500480600560Hint: Remember that MPC = ΔC/ΔY. Therefore, ask yourself the question of how much would you spend if your income changes from $100 to $200?4. If the prevailing level of output (equilibrium) is $800 billion and the full-employment (potential) output of $600 billion, and we know that the economyâs MPC is .8, how much should government spending be reduced to eliminate the inflationary gap? If taxes were increased instead, how much would the increase have to be?

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