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

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.

Select Any One Of the Following Options: Jack was receiving an Unemployment benefit of INR 12k per month. Now, he manages to get a Government Job and is receiving INR 12k per month as salary. What would happen to the GDP? Moreover, which component of the GDP would rise?The GDP would rise with rise in consumption expenditureNo impact on the GDP.GDP would fall.The GDP would rise with rise in Govt Expenditure on Goods and Services.

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 marginal propensity to save is 0.2 and the government decreases its purchases by $20 billion, then real GDP willDecrease by $100 billion.Increase by $100 billion.Decrease by $25 billion.Increase by $25 billion.

If the GDP is at its potential level, then what is the long-run effect of an increase in government purchases (G)? Reduction of consumption, net exports and investment through the wealth, interest rate and international trade effects. Reduction of only investment through the interest rate effect. Reduction of only consumption and investment through the wealth and interest rate effects. Reduction of only net exports through the international trade effect. Reduction of only consumption through the wealth and interest rate effects.