Asked by 111
Suppose the government knows that the MPC is equal to 0.80 and that the amount of the horizontal distance that the AD curve had to be shifted directly leftward from point E1 was equal to $1.51 trillion. What is the reduction in real government spending required to have generated this shift?
Therefore, the reduction in real government spending necessary to shift the AD curve leftward by $1.51 trillion is $--- trillion.
Therefore, the reduction in real government spending necessary to shift the AD curve leftward by $1.51 trillion is $--- trillion.
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Answered by
111
wrong answer. The decrease in real government spending induces a larger change in real GDP at an unchanged price level.
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