To combat a recession, the Indian government enacts expansionary fiscal policy, which increases government spending by 2 trillion rupees. In response, GDP rises by 6 trillion rupees.

a. What is the multiplier?

b. The policy pushes India from producing 3% below potential output to now producing 2% above potential output. Illustrate this change in an IS-MP graph assuming the real interest rate is constant at 4%.

c. If the Indian government wants to target the highest sustainable level of output, should it continue to increase government spending or pull back?

Explain your reasoning.