If the MPC equals 0.75,$100 billion tax increase will decrease consumption in the first round by

Name: If the MPC equals 0.75,$100 billion tax increase will decrease consumption in the first round by
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The formula for calculating the impact of a tax increase on consumption in the first round is MPC × tax increase. In this case, MPC is 0.75 and the tax increase is $100 billion. Therefore, the decrease in consumption in the first round would be 0.75 × $100 billion = $75 billion.

If the MPC Equals 0