Macro 2 - 3. Country A decides to increase spending by $2...

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Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model. The MPC is .9 in each country.
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1. How much is the government purchases multiplier for each country? 2. How much is the tax multiplier for each country?
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Unformatted text preview: 3. Country A decides to increase spending by $2 billion, while Country B decides to cut taxes by $2 billion. In which country will the new equilibrium level of income be greater? Please explain....
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This note was uploaded on 11/11/2010 for the course ECON Econ 301 taught by Professor Marya during the Spring '10 term at University of Massachusetts Boston.

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Macro 2 - 3. Country A decides to increase spending by $2...

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