Orion4784
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If real GDP is $570 billion, full employment GDP is $300 billion, and the marginal propensity to consume is 0.9, then Congress should
a. increase taxes by $20 billion.
b. increase taxes by $30 billion.
c. increase taxes by $270 billion.
d. increase spending by $27 billion.
e. decrease spending by $270 billion.
Please explain! Not sure how to do this type of problem.
Will mark brainliest!

Respuesta :

caugst40
The answer will be e
ferre5555

Answer:

b. increase taxes by $30 billion.

Explanation:

The formula for tax multiplier is -MPC/1-MPC

so i put -0.9 / (1 - 0.9) and got -9 then i did 300 - 570 and got -270 and finally i divided -270/ -9 and got 30

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