6. Most macroeconomists believe it is a good thing that taxes act as automatic stabilizers and lower the size of the multiplier.

However, a smaller multiplier means that the change in government purchases of goods and services, government transfers, or taxes necessary to close an inflationary or recessionary gap is larger. How can you explain this apparent inconsistency?

a. Suppose the government engages in increased purchases of goods and services. For each of the income groups in the accompanying table, what is the value of the multiplier—

that is, what is the “bang for the buck” from each dollar the government spends on government purchases of goods and services in each income group?

b. If the government needed to close a recessionary or inflationary gap, at which group should it primarily aim its fiscal policy of changes in government purchases of goods and services?