If the government purchases multiplier is 1.8 and the transfer payments multiplier is 1.2, how will an
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Question:
If the government purchases multiplier is 1.8 and the transfer payments multiplier is 1.2, how will an equal increase in government purchases and decrease in transfer payments affect GDP?
GDP will decrease because the government purchases multiplier is larger. | ||
GDP will increase. | ||
GDP will decrease because the MPC is lower for people who receive transfer payments. | ||
GDP will increase because the government knows how to correctly allocate funds better than consumers. | ||
GDP will not change because government revenue is constant. |
Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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