In economy with income taxes

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In an economy with income taxes, if the marginal propensity to consume were 0.8, the tax rate on income were 0.2, and the marginal propensity to import were zero: (a) How large an increase in government spending (with no change in taxes) would be required to raise equilibrium income by $2500 million? (b) How large a reduction in taxes would be required to raise equilibrium income by $2500 million? (c) Are your answers to (a) and (b) the same? Why or why not?

Reference no: EM131082089

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