How much of a tax cut is necessary if mpc is .75 & want to shift AD rightward by $40 billion? Round answer to 2 decimal places.
Initial increase in consumption = .75*40 billion = 3billion
Total increase in AD = 3 billion * multiplier (multiplier = 1/(1-.75) = 4) = 12 billion
Tax Cut = 12billion *.25/ .75= 4 billion
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