an economy is experiencing a high rate of inflation

Economics Sep 09, 2020

an economy is experiencing a high rate of inflation.the government wants to reduce consumption by $36 billion to reduce inflationary pressure.The MPC is 0.75. By how much should the government raise taxes to achieve its objective

Expert Solution

Given,

Consumption (C) = $36 billion

MPC = 0.75

Total Income (Y) = $36 billion / 0.75 = $48 billion

Total Income (Y) - Consumption (C)

$48 billion - $36 billion

= $12 billion

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