If the desired fiscal restraint is $80 billion and the AD excess is $160 billion,we can conclude that

Question

Quizplus · Accepted Answer

The desired fiscal restraint is $80 billion, and the AD excess is $160 billion. The fiscal multiplier formula is 1/MPS or 1/(1-MPC). To achieve an $80 billion reduction in AD excess of $160 billion, the multiplier must be 2 (160/80). Given the multiplier is 2, the MPS (Marginal Propensity to Save) is 0.5 because the multiplier formula is 1/MPS, so 1/0.5 = 2.

If the Desired Fiscal Restraint Is $80 Billion and the AD