Question

Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $32 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist a believes that the government spending multiplier is 4 and the tax multiplier is 2. Economist b believes that the government spending multiplier is 2 and the tax multiplier is 8.

Answer 1

Answer:

Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist a believes that the government spending multiplier is 4 and the tax multiplier is 2. Economist b believes