(A)If MPC = 0.75 (and there are no income taxes but only lump-sum taxes) when I decreases by 100, how much will the IS curve for any given interest rate shifts to the right by? (B) Assume a simple model with no government and no foreign sector. If an increase in autonomous investment of 200 leads to an increase in total consumption of 600, what is the size of the expenditure multiplier?

(A)If MPC = 0.75 (and there are no income taxes but only lump-sum taxes) when I decreases by 100, how much will the IS curve for any given interest rate shifts to the right by? (B) Assume a simple model with no government and no foreign sector. If an increase in autonomous investment of 200 leads to an increase in total consumption of 600, what is the size of the expenditure multiplier?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.6P

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