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Business, 02.01.2020 21:31 zdwilliams1308

Suppose the governments of two different economies, economy j and economy k, implement a permanent tax cut of the same size. the marginal propensity to consume (mpc) in economy j is 0.85 and the mpc in economy k is 0.8. the economies are identical in all other respects. the tax cut will have a larger impact on aggregate demand in the economy with the (smaller mpc or larger mpc).

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