Question

1. consider an economy in which the current level of income is $700b, the multiplier is 3, the marginal tax rate is 20%, and the current budget deficit is $20b. suppose the government increases spending to increase GDP to $715b, the budget deficit becomes:

a. less than or equal to $20b

b. more than $20b but not more than $23b

c. more than $23b but not more than $26b

d. more than $26b

2. if the multiplier is 6, the income multiplier with respect to the money supply is 4, and the money multiplier is 5, then which of the following policies increase income by $50 billion dollars?

a. increase government spending by $4 billion and the money supply by $8 billion.

b. central bank sale of $2 billion bonds and increase government spending by $15 billion higher.

c. central bank purchase of $2 billion bonds and government spending $5 billion higher.

d. none of the above

Answer 1

option d is correct it will be 443