Evaluate the Expenditure Multiplier effect coming from an increase of government consumption in $400, combined with a reduction of taxes in the amount of $200 (assume a mpc=0.8) show formula and calculations for full credit.
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Question
Evaluate the Expenditure Multiplier effect coming from an increase of government consumption in $400, combined with a reduction of taxes in the amount of $200 (assume a mpc=0.8)
show formula and calculations for full credit.
Identify and explain 2 potential complications related to the use of fiscal expansion as a way to promote economic activity