4. Show why a $10 billion reduction in government purchases of goods and services will have a larger effect on real GDP than a

$10 billion reduction in government transfers by completing the accompanying table for an economy with a marginal propensity to consume (MPC) of 0.6. The first and second rows of the table are filled in for you: on the left side of the table, in the first row, the $10 billion reduction in government purchases decreases real GDP and disposable income, YD, by

$10 billion, leading to a reduction in consumer spending of $6 billion (MPC × change in disposable income) in row 2. However, on the right side of the table, the $10 billion reduction in transfers has no effect on real GDP in round 1 but does lower YD by $10 billion, resulting in a decrease in consumer spending of $6 billion in round 2.