In an economy when net taxes decrease by 200 billion real GD

In an economy, when net taxes decrease by $200 billion, real GDP increases by $600 billion The value of the MPC in this economy is (Round your response to two decimal places.)

Solution

Ans. When the net taxes decreased by $200 billion, Then additional disposable income is $200 billion. And the real GDP increases by $600 billion so increase in income by $600 billion.

So the value of MPC in the economy is = Delta C / Delta Y = $ 200 / $ 600 = 0.3333.