Assume the corresponding multiplier values: government purchases multiplier (2) and tax multiplier (-1.6). Suppose the current equilibrium GDP is $13.5 trillion and the potential GDP is $14.3 trillion. To return to potential GDP, what is the necessary change in government purchases? Government purchases decrease by $800 billion. Government purchases increase by $800 billion. Government purchases decrease by $125 billion. Government purchases increase by $400 billion. Government purchases increase by $500 billion.

If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $15 trillion, then government purchases would need to increase by ________ to restore the economy to potential GDP.

The government invests $1.2 trillion in infrastructure, restoring GDP from $10 trillion to its potential level of $12.5 trillion. What is the value of the government purchases multiplier? 1.2 2.08 2 2.5 0.48

11) Suppose President Obama is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP?A) There is a $20 billion increase in equilibrium GDP.B) There is a $20 billion decrease in equilibrium GDP.C) There is a $15 billion increase in equilibrium GDP.D) There is a $15 billion decrease in equilibrium GDP.12) What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.A) 5.3B) 10C) 11.1D) 10013) In an open economy, the government purchases multiplier will beA) larger as the marginal propensity to import increases.B) smaller as the marginal propensity to import increases.C) larger as the marginal propensity to tax increases.D) smaller as the marginal propensity to consume increases.14) Calculate the government purchases multiplier if the marginal propensity to consume equals 0.8, the tax rate is 0.1, and the marginal propensity to import equals 0.2.A) 2.1B) 1.9C) 1.7D) 1.415) The government purchases multiplier will be larger if the marginal income tax rate decreases.16) The larger the marginal propensity to import, the larger the government purchases multiplier.17) In a closed economy with fixed or autonomous (non-income dependent) taxes, the balanced budget government purchases multiplier is negative.18) Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.5.19) Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9, the tax rate equals 0.25, and the marginal propensity to import equals 0.15.20) Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.21) Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.8, the tax rate equals 0.2, and the marginal propensity to import equals 0.05.

The government increases unemployment benefits by $1 million and funds it entirely by raising taxes. The absolute value of the government purchases 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 increases by $1 million GDP decreases by $1 million GDP increases by $3 million GDP does not change GDP decreases by $3 million

In the Keynesian income-expenditure model which includes both a government sector and an external sector, an increase in autonomous consumption, government expenditure or investment combined with an increase in the marginal tax rateGroup of answer choiceswould increase the multiplier and reduce net exports, assuming the multiplier remains greater than onewould lead to a higher equilibrium level of income and an unchanged level of net exports while the multiplier would be reducedwould lead to an increase in net exports, assuming that the multiplier remains greater than onewould reduce the multiplier but, assuming this remains greater than one, equilibrium income would rise and net exports would fall.