Question
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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Economics Today
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