Assume That Investment, Net Exports, Government Expenditures, and Taxes Do

question 9

Essay

Assume that investment, net exports, government expenditures, and taxes do not change with changes in real GDP and the MPC is .75.(a) Suppose government spending increases by $20 billion.What is the impact on real GDP?
(b) Suppose that instead lump-sum taxes increase by $20 billion.What is the impact on real GDP?
(c) How would the results in (a) and (b) be different if imports and taxes increase as real GDP increases?

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Definitions:

Selective Active Transport

The process by which cells selectively move molecules from one side of a membrane to the other, requiring the use of energy, usually in the form of ATP.

Dialysis

A medical procedure that removes waste products and excess fluid from the blood when the kidneys are not functioning properly.

Artificial Kidneys

Medical devices designed to replicate the function of natural kidneys by removing waste and excess substances from the blood of patients with renal failure.

Glomerular Capsule

Part of the nephron in the kidney, a cup-like sac surrounding the glomerulus, which filters blood to form urine.