If we have a $10.9 trillion contractionary gap and the MPC is .86, how much will net taxes need to decrease in order to close the gap?
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pohnpei397
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To find this answer, we need to know the formula for the tax multiplier. This is given as
Tax multiplier = 1 – spending multiplier.
Therefore, we need to know the spending multiplier. It is found through the equation
Multiplier = 1/(1- MPC).
We...
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