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  • 22-05-2023
  • Business
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Assume that Equilibrium Real GDP is $20,000 while Potential Real GDP is $15,000. The marginal propensity to consume is 9/10. Assume that government decides to lower taxes by $1,000. To pay for this, it lowers government purchases by $1,000. As a result of these two changes, what is the new Equilibrium Real GDP?

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