SOLUTION: In the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by ______ and increases the equilibrium level of income by

Question 1150421: In the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by ______ and increases the equilibrium level of income by _________
Answer by MathLover1(20849) (Show Source): You can put this solution on YOUR website!

Decrease in taxes is $3 billion. Then the planned expenditures would increase by $3 billion as a result of tax decrease. The decrease in taxes is the finances increase in expenditures and as a result the level of income increases by $3 billion.
so,
In the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by __$3 billion____ and increases the equilibrium level of income by ____$3 billion_____ .
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