How much more government spending would achieve the target

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Reference no: EM13235524

If the AD shortfall is $800 billion and the MPC is 0.8,
(a) How large is the desired fiscal stimulus?
(b) How large an income tax cut is needed?
(c) Alternatively, how much more government spending would achieve the target?

If the AD excess is $400 billion and the MPC is 0.9,
(a) How much fiscal restraint is desired?
(b) By how much do income taxes have to be increased to get that restraint?

Reference no: EM13235524

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