2 points eBook D References Suppose a country's MPC is 075, and in this country, government seeks to boost real GDP by either increasing government purchases by $90 billion or by reducing taxes by the same amount. Instructions: For changes in real GDP enter your answer as a whole number. Round your answer two decimal places for multipliers. If you are entering a negative number include a minus sign. a. If it increases government purchases, real GDP will increase by If the government instead lowers taxes, real GDP will increase by b. Now suppose another country's MPC is 0.6, and in this country, government seeks to reduce real GDP by either decreasing billion, suggesting an expenditures mul billion, suggesting a tax multiplier of government purchases by $90 billion or by raising taxes by the same amount. If it decreases government purchases, real GDP will decrease by $ If the government instead raises taxes, real GDP will decrease by $ billion, suggesting a tax multiplier of tiplier of billion, suggesting an expenditures multiplier of c. Which of the following statements best explains the difference in magnitude of the multiplier effects between the expenditures multiplier and the tax multiplier? O The multiplier effect is exactly the same since both involve government policy. O The tax multiplier is larger since households spend more and spend better than governments do. O The tax multiplier is smaller since some of the extra disposable income is saved with a tax cut O The tax multiplier is smaller since all governments inevitably spend more than they say they will. 3 points eBook B References Suppose that nation A has a marginal propensity to consume of 035, while nation B has a marginal propensity to consume of 0.80. Instructions: Round your answers to 1 decimal place. If you are entering a negative number include a minus sign. a. What is the tax multiplier for nation A? b. What is the tax multiplier for nation B? c. Which of the following is true of the relationship between the tax multiplier and consumption/saving behavior? O When households decide to consume a lower portion of their income, the tax multiplier is greater. O When households decide to consume a greater portion of their income, the tax multiplier is greater. d. Suppose that nation A and nation B both increase aggregate taxes by $1 million. Which of the following statements is true? O Mation B will experience a larger decrease in real GDP. O Nation A will experience a larger decrease in real GDP. References Imagine an isolated economy made up of individuals who are both consumers and sellers. The table below tracks the income and spending of a small part of this economy: 8 individuals called A through H. Naturally, the whole economy includes additional people. Assume that individual A has just decided to spend $12.000 in a store owned by individual B and that individual B, along with everyone else in this economy, has a marginal propensity to consume (MPC) of 0.8. Instructions: Round your answers to two decimal places. a. Assume that every individual who receives additional income will spend an additional amount according to his or her MPC. Use this information to complete the table below. Calculating the Expenditures Multiplier Extra Income Individual (dollars) Extra Expenditure (dollars) o~ | 0000- | 0000 sizeen | | e | 0 szee | 0| [ o