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Katie32 Katie32
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Multiplier Effects of Transfer Payments and Taxes

Assume the tax multiplier is -6.5 and a $400 billion tax increase is implemented. Holding everything else constant including the price level, what is the change in GDP?

▸ a $0.016 billion decrease in GDP

▸ a $2600 billion increase in GDP

▸ a $0.016 billion increase in GDP

▸ a $2600 billion decrease in GDP
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Macroeconomics


Edition: 3rd
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nursethomasnursethomas
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More solutions for this book are available here
a $2600 billion decrease in GDP

The change in GDP is calculated as: (tax multiplier x tax increase).
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