What new levels of these fiscal policy tools would be needed?

Consider an economy in which the marginal propensity to consume is two-thirds prices are constant Show more Consider an economy in which the marginal propensity to consume is two-thirds prices are constant the multiplier is three G is initially 1000 taxes are autonomous (not related to income) and are initially 1300 transfer payments are initially 300 and GDP is initially 7000. a) The government wishes to increase GDP to 7300 and it is considering changing government purchases or taxes or transfer payments. What new levels of these fiscal policy tools would be needed? In each case what could the new government surplus or deficit be? b) Suppose instead that the governemtn wished to reduce GDP to 6400 and again it was considering using only one of its three available fiscal policy tools. What level of these tools would be needed? In each case what could the governemtnsurplus or deficit be? c) Suppose instead that the goverment wished to raise GDP to 7100 but it was unwilling to run a surplus or deficit. Therefore the change in government purchases would have to be matched by and equal change in taxes. What change in government purchases and taxes would be needed? Show less

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