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In: Economics

Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8....

Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8.
Suppose the government cuts taxes by $100 billion while holding government purchases constant. What
happens to the following variables? Explain and calculate the amount of change for each variable.
a. Public saving (Sg):
b. Private saving (Sp):
c. National Saving (S):
d. Investment (I)

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Expert Solution

Rahul Sunny answered 2 years ago
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