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

Answer rating: 100% (QA)

Here we are given 1 The government has reduced the unemployment benefits by 1 million 2 The g... View the full answer