Explain the Effect of a Cut in Lump-Sum Taxes of $40

question 33

Essay

Explain the effect of a cut in lump-sum taxes of $40 billion on the economy.Assume that investment, net exports, government expenditures, and taxes do not change with changes in real GDP and the MPC is .75.How does the impact of this change differ from that of a $40 billion increase in government spending?

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