Answer to Question #326208 in Macroeconomics for GIGIG

Question

In an open economy, the marginal propensity to consume c is 0.9, and the tax rate is 1/3. If the budget deficit increased by 15 mil. € determine:

a) the change in the level of investments that could have led to this increase in the budget deficit;

b) assuming that the increase in budget deficit is due only to the increase in government spending, determine the change in government spending (∆G) that could have led to this effect. 

Answer 1

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