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Marginal propensity to consume out new income

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Reference no: EM132145465

Suppose the government raises taxes by $100 billion. Assume that the marginal propensity to consume out new income is 0.8(i.e if a person receives $100, he will spend $80 and save $20). Consider what happens to the following, how much do they rise or fall by:

1) public savings

2) private savings

3) investment

Reference no: EM132145465

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