When government spending increases

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Reference no: EM131076473

Part A. When government spending increases by $1, planned expenditures increases by $1

a) and the equilibrium level of income will increase by $1

b) and the equilibrium level of income will increase by $1 times the spending multiplier

c) and the equilibrium level of income will increase by less than $1

Part B. When taxes are cut by $1, planned expenditures

a) increase by less than $1, and the equilibrium level will increase by $1 times the tax multiplier

b) increase by $1 and the equilibrium level of income will increase by $1 times the tax multiplier

c) increase by $1 and the equilibrium level of income will increase by $1 times the spending multiplier

Reference no: EM131076473

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