Author Question: What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to ... (Read 160 times)

drink · **on:** Jun 29, 2018

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

A) 5.3 B) 10 C) 11.1 D) 100

Question 2

Suppose the president is successful in passing a 5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP?

A) There is a 20 billion decrease in equilibrium GDP.
B) There is a 15 billion decrease in equilibrium GDP.
C) There is a 15 billion increase in equilibrium GDP.
D) There is a 20 billion increase in equilibrium GDP.