Question

In: Economics

Consider a nation with a marginal propensity to consume of 0.75. a. What will its marginal...

Consider a nation with a marginal propensity to consume of 0.75.

a.

What will its marginal propensity to

save

be?

b.

What would happen to its consumption (give the direction and size of the effect) if

taxes (T) were to increase by 100, assuming th

at real aggregate income is

unaffected? What would happen to private saving? To public saving? To national

saving?

c.

Suppose, instead, that government purchases (G) increase by 100 while taxes

remain unchanged. Assuming that aggregate income is unaffected,

what would

happen to consumption? What would happen to private saving? To public saving?

To national saving?

Expert Solution

Rahul Sunny answered 9 months ago

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