27) What is the effect on savings of a tax cut of $10 billion? Is this inflationary or deflationary? Assume that the MPC is 0.85.
the amount of consumption would be 10billion*.85=8.5billion:meaning we would be saving 1.5 billion out of the 10 billionsince MPS=.15(1.5)10billion=1.5 billion.: the multiplier which would…

e the GDP by 8.5billion*6.67=$56.7billion:this would have a tendency to increase interest rates andtherefore could be inflationary.

. .

The post What is the effect on savings of a tax cut of $10 billion? Is this inflationary appeared first on Unified Papers.