Assuming a fixed amount of taxes and a closed economy and that the marginal propensity to consume equals 0.50, calculate the value of the following multipliers. Be sure to use a negative sign (-) to show if a multiplier has a negative value. The government purchases multiplier equals (enter your response rounded to one decimal place). The tax multiplier equals (enter your response rounded to one decimal place). The balanced budget multiplier equals (enter your response rounded to one decimal place).
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In this case, the MPC is given as 0.50, so the government purchases multiplier would be 1 / (1 - 0.50) = 1 / 0.50 = 2. The tax multiplier is calculated as -MPC / (1 - MPC). In this case, the MPC is 0.50, so the tax multiplier would be -0.50 / (1 - 0.50) = -0.50 / Show more…
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