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Unformatted text preview: me that you have been studying the economy for some
years and that you have read the section on multipliers and want to relate it to the expenditure program. If you found
out that when there was a $200 B spending increase the economy reacted by expanding $600 B, what is the tax
use the multiplier formula DY/DG = mult and solve for the unknown = 600/200 = 3
15. There is no question that URI's location in Kingston has a positive economic effect on the Kingston area. If URI
were to expand its operation to accommodate more students, then the economic multiplier would be bigger if we
calculated it for _____. [Would the impact be bigger if we looked at just what happens in Kingston, or what happens in
South County, or the state?]
b. South County
c. Rhode Island
d. it is the same for all geographical areas
It will be bigger where there are fewer leakages of spending - people spending out side of the area - and that will
happen in RI.
16. The reports on the Japanese economy were not good: it appears that Japan has slipped back into a recession. Which
of the following proposals would be an appropriate fiscal policy, according to a Keynesian, to help get the Japanese
economy moving again?
a. a cut in inefficient government spending
b. an increase in income tax rates to finance pensions
c. a build-up of the Japanese military
d. a decrease in the money supply
an appropriate fiscal policy would be to build up the defense sector's spending...
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