Suppose the tax multiplier is 2.7. Assuming prices are constant, this means that Group of answer choices a $1 rise in...

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Suppose the tax multiplier is 2.7. Assuming prices are constant, this means that Group of answer choices a $1 rise in...

Suppose the tax multiplier is 2.7. Assuming prices are constant, this means that

Group of answer choices

a $1 rise in government spending will raise both total spending and Real GDP (assuming prices are constant) by $2.70.

a $1 decline in taxes will lower Real GDP by $2.70.

a $1 decline in taxes will raise Real GDP by $2.70.

a $1 rise in taxes will change interest rates by 2.70 percent compared to what they were before the $1 rise in government spending.

none of these options.

business economics

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Answer 1

Answer #1

Correct option is (3).

Tax multiplier of 2.7 means that if taxes increase (decrease) by $1, real GDP decreases (increases) by $2.7.

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Answer 2

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Suppose the tax multiplier is 2.7. Assuming prices are constant, this means that Group of answer choices a $1 rise in...

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