In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus sign in your answer. a. If government purchases increase by $2 billion in an economy with an MPW of 0.55 then the spending multiplier is shifts to the (Click to select) by S billion. b. If government purchases decrease by $6 billion in an economy with an MPC of 0.40 then the spending multiplier is shifts to the (Click to select) by S billion. c. If a $4 billion tax rise occurs in an economy with an MPW of 0.70 then the spending multiplier is (Click to select) by $ billion. and the AD curve finally d. If a $5 billion tax cut causes an initial $1.6 billion increase in spending on domestic items then the spending multiplier is finally shifts to the (Click to select) by $ billion. and the AD curve finally and the AD curve finally shifts to the and the AD curve

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter24: Fiscal Policy
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In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the
direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve
rounded to 1 decimal place. Do not put minus sign in your answer.
a. If government purchases increase by $2 billion in an economy with an MPW of 0.55 then the spending multiplier is
shifts to the (Click to select) by S
billion.
b. If government purchases decrease by $6 billion in an economy with an MPC of 0.40 then the spending multiplier is
shifts to the (Click to select) by S
billion.
c. If a $4 billion tax rise occurs in an economy with an MPW of 0.70 then the spending multiplier is
(Click to select) by $
billion.
and the AD curve finally
d. If a $5 billion tax cut causes an initial $1.6 billion increase in spending on domestic items then the spending multiplier is
finally shifts to the (Click to select) by $
billion.
and the AD curve finally
and the AD curve finally shifts to the
and the AD curve
Transcribed Image Text:In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus sign in your answer. a. If government purchases increase by $2 billion in an economy with an MPW of 0.55 then the spending multiplier is shifts to the (Click to select) by S billion. b. If government purchases decrease by $6 billion in an economy with an MPC of 0.40 then the spending multiplier is shifts to the (Click to select) by S billion. c. If a $4 billion tax rise occurs in an economy with an MPW of 0.70 then the spending multiplier is (Click to select) by $ billion. and the AD curve finally d. If a $5 billion tax cut causes an initial $1.6 billion increase in spending on domestic items then the spending multiplier is finally shifts to the (Click to select) by $ billion. and the AD curve finally and the AD curve finally shifts to the and the AD curve
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