Appropriately and determine the net effect of raising taxes

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Assume an open, mixed economy (C + I + G + X = real GDP) and an MPS of .2. Explain if it would be expansionary, contractionary, or useless to the economy to increase government expenditures by $50 billion and also increase taxes by $50 billion. Show your work. (Hint: You have to calculate the multiplier and apply it appropriately and determine the net effect of raising taxes and government spending by the same amount.)

Reference no: EM13770616

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