After the financial crisis in the 1990s many economists ...

[hubes95]

After the financial crisis in the 1990s many economists criticized the IMF and the World Bank. Some suggestions for reform are to
 
  A) eliminate both the institutions.
  B) increase private-sector lending by governments providing tax breaks to lenders.
  C) create a board of directors made up of finance ministers for the IMF.
  D) all of the above

Question 2

If the economy has an MPC of 0.8, by how much will a 50 billion increase in government purchases increase GDP? By how much will a 50 billion increase in taxes decrease GDP?
 
  What will be an ideal response?

[parshano]

Answer to Question 1

D

Answer to Question 2

With an MPC of 0.8, the multiplier is 1/(1 - 0.8 ) = 5, so an increase in spending will increase GDP by 250 billion. The tax multiplier would equal -4, so the increase in taxes would reduce GDP by 200 billion.

[hubes95]

Excellent

[Joy Chen]

Gracias!