Categories

Suppose the governments of two different economies, economy J and economy K, implement a permanent tax cut of the same size. The marginal propensity to consume (MPC) in economy J is 0.85 and the MPC in economy K is 0.8. The economies are identical in all other respects. how multiplier shall be different

 
Category : Macro Economics | Answer: 1 3 Years Ago

Follow (0)

Views (4499)

Share

Share

Share

Share

Tax Multiplier = MPC/1-MPC

J Multiplier = 0.85/1-0.85

               =5.66

K =0.8/1-0.8

= 4

 

3 Years Ago
(9)
Reply