The income will be increased by $533.33 billion with MPC equals 0.75 and a decrease in taxes by $400 billion.
MPC stands for marginal propensity to consume which is determined by dividing the change in consumption of consumers by to change in income earned by them.
Given values:
MPC = 0.75
Decrease in taxes (Change in consumptiuon)= $400 billion
Computation of increase in income (Change in income):
[tex]\rm\ MPC=\frac{\rm\ Change \rm\ in \rm\ Consumption}{\rm\ Change \rm\ in \rm\ Income} \\\rm\ Change \rm\ in \rm\ Income = \frac{\rm \ Change \rm\ in \rm\ Consumption}{\rm\ MPC}\\\rm\ Change \rm\ in \rm\ Income =\frac{\$ 400 \rm\ billion}{\rm\ 0.75}\\\\\rm\ Change \rm\ in \rm\ Income=\$ 533.33 \rm\ billion[/tex]
Therefore, when there is a decrease in consumption by $400 billion with MPC 0.75 then there is an increase in income by $533.33 billion.
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