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The government cuts unemployment benefits by $1 million and uses all the savings to reduce taxes. The absolute value of the government purchase multiplier is

The government cuts unemployment benefits by $1 million and uses all the savings to reduce taxes. The absolute value of the government purchase multiplier is 3, that of the tax multiplier is 2 and that of the transfer payment multiplier is also 2. What is the impact on GDP?

GDP decreases by $3 million

GDP increases by $1 million

GDP decreases by $1 million

GDP increases by $3 million

GDP does not change

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