Without changing government spending

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Reference no: EM13834057

GRAPHS ARE NEEDED

You are given the following data for national economy of a country N:

Equilibrium GDP is $9000 million

MPC is 0.8

It is considered necessary to increase GDP by 4%.

Find:

1) what amount of additional government spending (without changing taxes) would be needed to reach the desired increase of GDP?

2) what change in total amount of direct taxes (without changing government spending) would be necessary to reach the same increase of GDP?

3) if additional government spending were financed from tax increase (keeping government budget balanced) what amount of additional government spending and additional tax revenue would be needed to reach the above-mentioned increase of GDP?

Reference no: EM13834057

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