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Question

If the effective multiplier for fiscal policy is 2, how much change in government purchases would be required to

close a 500 billion negative output gap, other things being equal?


a. A 250 billion increase

b. A 1 Trillion increase

c. A 1 trillion decrease

d. A 250 billion decrease

Top Answer

The correct option is: b. A 1 Trillion increase multiplier=2 2 x 500= 1trillion A... View the full answer

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