Assume an economy with a budget deficit of $50 billion. Suppose the income multiplier is 1.5 and the deficit response index is .20. Calculate the new budget deficit if Congress cuts spending by the exact amount of the budget deficit.

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The Answer of Assume an economy with a budget deficit of $50 billion. Suppose the income multiplier is 1.5 and the deficit response index is .20. Calculate the new budget deficit if Congress cuts spending by the exact amount of the budget deficit.

Assume an Economy with a Budget Deficit of $50 Billion