An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $15 billion to reduce inflationary pressure. The MPC is 0.60 By how much should the government raise taxes to achieve its objective?

An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $15 billion to reduce inflationary pressure. The MPC is 0.60 By how much should the government raise taxes to achieve its objective?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 17E

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An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $15 billion to reduce inflationary pressure. The MPC is 0.60.
By how much should the government raise taxes to achieve its objective?

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