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son4ous [18]
2 years ago
7

Suppose the GDP is in equilibrium at full employment and the MPC is .80. If government wants to increase its purchase of goods a

nd services by $16 billion without causing either inflation or unemployment, taxes should be: A. Increased by $20 billion B. Reduced by $16 billion C. Increased by $16 billion D. Reduced by $20 billion
Business
1 answer:
garri49 [273]2 years ago
3 0

Answer:

A) increased by $20 billion

Explanation:

The Change in government spending should have a corresponding increase of the MPC multiplied by the change in taxes.

Therefore,

$16billion = 0.8 × change in taxes

Change in taxes = $16billion /0.8 = $20 billion(increase)

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