Suppose the consumption function in an economy is given by C(Y) = 100+0.6(Y-T), where Y represents income and T stands for net taxes. Suppose further that investment, I, is 200, government spending, G, is 120, and net taxes, T, are 120. The value of the government spending multiplier is: O a. 2.5 O b. 250 O c.-1 O d. 25

Suppose the consumption function in an economy is given by C(Y) = 100+0.6(Y-T), where Y represents income and T stands for net taxes. Suppose further that investment, I, is 200, government spending, G, is 120, and net taxes, T, are 120. The value of the government spending multiplier is: O a. 2.5 O b. 250 O c.-1 O d. 25

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.6P

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