In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers. a. If government purchases increase by $3 billion in an economy with an MPW of 0.65 then the spending multiplier is AD curve finally shifts to the (Click to select) by $ billion. b. If government purchases decrease by $7 billion in an economy with an MPC of 0.20 then the spending multiplier is AD curve finally shifts to the (Click to select) by $ billion. and the [ and the billion. c. If a $5 billion tax rise occurs in an economy with an MPW of 0.60 then the spending multiplier is shifts to the (Click to select) by $ and the AD curve finally d. If a $2 billion tax cut causes an initial $0.3 billion increase in spending on domestic items then the spending multiplier is the AD curve finally shifts to the (Click to select) by $ billion. and
In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers. a. If government purchases increase by $3 billion in an economy with an MPW of 0.65 then the spending multiplier is AD curve finally shifts to the (Click to select) by $ billion. b. If government purchases decrease by $7 billion in an economy with an MPC of 0.20 then the spending multiplier is AD curve finally shifts to the (Click to select) by $ billion. and the [ and the billion. c. If a $5 billion tax rise occurs in an economy with an MPW of 0.60 then the spending multiplier is shifts to the (Click to select) by $ and the AD curve finally d. If a $2 billion tax cut causes an initial $0.3 billion increase in spending on domestic items then the spending multiplier is the AD curve finally shifts to the (Click to select) by $ billion. and
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
Related questions
Question
Transcribed Image Text:In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending
multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places,
and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers.
a. If government purchases increase by $3 billion in an economy with an MPW of 0.65 then the spending multiplier is
AD curve finally shifts to the (Click to select) by $
billion.
b. If government purchases decrease by $7 billion in an economy with an MPC of 0.20 then the spending multiplier is
AD curve finally shifts to the (Click to select)
by $
billion.
and the
[
and the
billion.
c. If a $5 billion tax rise occurs in an economy with an MPW of 0.60 then the spending multiplier is
shifts to the (Click to select) by $
and the AD curve finally
d. If a $2 billion tax cut causes an initial $0.3 billion increase in spending on domestic items then the spending multiplier is
the AD curve finally shifts to the (Click to select) by $
billion.
and
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