In an open economy the government purchases multiplier will be A larger as the

# In an open economy the government purchases

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291) In an open economy, the government purchases multiplier will be A) larger as the marginal propensity to consume decreases.B) smaller as the marginal propensity to tax decreases.C) larger as the marginal propensity to import decreases.D) smaller as the marginal propensity to import decreases.Answer: C 291) Page Ref: 983/601 Learning Outcome: Macro - 15: Describe how government policies and exchange rates affect open economy macroeconomics. 292) Calculate the government purchases multiplier if the marginal propensity to consume equals0.75, the tax rate is 0.2, and the marginal propensity to import equals 0.3.292) Page Ref: 983/601 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 293) In an open economy, the government purchases multiplier will be larger the Page Ref: 983/601 Learning Outcome: Macro - 15: Describe how government policies and exchange rates affect open economy macroeconomics. 294) Assume a closed economy, that taxes are fixed, and the marginal propensity to consume is equalto 0.8. What is the government spending multiplier? Page Ref: 980 - 981/598 - 599 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 295) Suppose that Congress allocates \$1 billion to clean up after hurricanes in 2016. It also raises taxesby \$1 billion to keep the deficit from growing. If the marginal propensity to consume is 0.9, whatis the effect on equilibrium GDP? A) GDP increases by \$10 billion.B) GDP does not change.C) GDP increases by \$900,000.D) GDP increases by \$1 billion.295)Answer: D Page Ref: 981 - 982/599 - 600 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 73