Question: For the economy described in Problems 3 and 4, take as given that the multiplier for this economy is 2.5. Find the effect on short-run

For the economy described in Problems 3 and 4, take as given that the multiplier for this economy is 2.5. Find the effect on short-run equilibrium output of (L04)
a. An increase in government purchases from 1,500 to 1,600.
b. A decrease in tax collections from 1,500 to 1,400 (leaving government purchases at their original value).
c. A decrease in planned investment spending from 900 to 800.

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a An increase in government purchases of 100 causes autonomous expenditure to rise from 3400 to 3500 ... View full answer

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