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Congress is considering a ta

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solution


Question

Congress is considering a tax credit program for those who purchase wind or solar-powered products. Proponents of the program have said that $400 million will be given directly to taxpayers and are arguing that this will have an economic effect that is greater than the original $400 million spent because of the multiplier effect. Many voters and taxpayers are not familiar with the concept of a multiplier in this sense. Your think tank has decided to produce a short report that will help voters better understand the proponents? claims and Gabe has asked you to write this. Be sure to include the following in your report;?Give a basic explanation of how the multiplier concept is computed, including MPC.;?Assume that the average American?s marginal propensity to consume (MPC) is ?, and American producers? MPC is also ?.;?Calculate the following, explaining how you arrived at each result;?The amount consumers will spend on new consumption;?The amount of new spending from producers;?The multiplier in this case;?The total increase in spending from the primary spending of $400 million;?Explain the multiplier concept as it applies in this case.;?What are the qualifications and limitations of the Multiplier Model?

 

Paper#29781 | Written in 18-Jul-2015

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