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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____


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Answer:

$3 billion; more than $3 billion

Explanation:

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.

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