29. Suppose, the multiplier is five and a change in government spending leads to a cumulative...
29. Suppose, the multiplier is five and a change in government spending leads to a cumulative $500 million decrease in aggregate spending. This means:
A) Government spending decreased by $500 million and aggregate demand shifts left.
B) Taxes increased by $500 million and aggregate demand shifts right.
C) Taxes decreased by $100 million and aggregate demand remain the same.
D) Government spending decreased by $100 million and aggregate demand shifts left
Homework Answers
Option D. Government spending decreased by $100 million and aggregate demand shifts left
Explanation: When multiplier is 5, it means wen government reduces spending by $1, total output falls by $5.
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29. Suppose, the multiplier is five and a change in government spending leads to a cumulative...
Why is the multiplier for a change in taxes smaller than for a change in spending?...
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1. If the economy is at full employment, increases in government spending: A) have a multiplier...
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22. Why is the multiplier for a change in taxes smaller than for a change in spendi...
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