Suppose That the Government Increases Expenditures by $150 Billion While

question 64

Essay

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effect of these changes? Why is the combined change not equal to zero?

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Definitions:

Polychaetes

Marine annelid worms known for their bristled segments, diverse in marine environments.

Parapodia

Paired, lateral appendages found on each segment of polychaetes and some other annelids, used for locomotion and sometimes respiratory functions.

Radula

A rasping, tongue-like organ found in many molluscs, used for feeding by scraping or cutting food before ingestion.

Earthworms

Terrestrial invertebrate worms belonging to the phylum Annelida, known for their role in aerating soil and breaking down organic matter.