Assume an economy where: PAE = C + I P + G C = C 0 + c(Y-T) I = I 0 G = G 0 T ...
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Assume an economy where:
PAE = C + IP + G
C = C0 + c(Y-T)
I = I0
G = G0
T = T0 + tY
Assume that the marginal propensity to consume is 0.75 and the marginal tax rate is 0.2.
The balanced budget multiplier for this economy is:
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