By how much should government purchases the gdp

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1: For simplicity, let's assume that every household has a marginal propensity to consume (MPC) of 0.75. If the government implements a fiscal policy involving its purchases of goods and services, by how much should government purchases (G) change to increase the GDP by $4trillion?

2: For simplicity, let's assume that every household has a marginal propensity to consume (MPC) of 0.75. If the government implements a fiscal policy involving government transfers (TR), by how much should government transfers change to increase the GDP by $4trillion?

3: For simplicity, let's assume that every household has a marginal propensity to consume (MPC) of 0.75. What can you conclude about the effect of fiscal policy involving government purchases and fiscal policy involving government transfers on aggregate demand?

Reference no: EM13239354

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