Which of the following would be a government spending and tax multiplier for a country?

Choose 1 answer:
(A) Government spending multiplier equal 9 and tax multiplier equals $-8$
(B) Government spending multiplier equal 10 and tax multiplier equals $-5$
(C) Government spending multiplier equal 12 and tax multiplier equals $-15$
(D) Government spending multiplier equal 3 and tax multiplier equals $-4$
(E) Government spending multiplier equal -9 and tax multiplier equals $-9$

Question

Which of the following would be a government spending and tax multiplier for a country?

Choose 1 answer:
(A) Government spending multiplier equal 9 and tax multiplier equals $-8$
(B) Government spending multiplier equal 10 and tax multiplier equals $-5$
(C) Government spending multiplier equal 12 and tax multiplier equals $-15$
(D) Government spending multiplier equal 3 and tax multiplier equals $-4$
(E) Government spending multiplier equal -9 and tax multiplier equals $-9$

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ To determine the correct government spending and tax multipliers, we need to understand the basic definitions. The government spending multiplier indicates how much total economic output increases for each dollar of government spending. The tax multiplier indicates the change in total output resulting from a change in taxes. Typically, the government spending multiplier is positive, and the tax multiplier is negative because an increase in taxes reduces disposable income and thus consumption. ‖ ‖ step 2 ⋮ We need to look for the answer choice where the government spending multiplier is positive and the tax multiplier is negative. This is because government spending directly injects money into the economy, increasing output, while higher taxes reduce disposable income and thus decrease output. ‖ ‖ step 3 ⋮ Reviewing the answer choices, we can eliminate choice E because it has a negative government spending multiplier, which is not consistent with economic theory. ‖ ‖ step 4 ⋮ Among the remaining choices, A, B, C, and D, all have positive government spending multipliers and negative tax multipliers, which align with the expected signs for these multipliers. ‖ ‖ step 5 ⋮ Without additional information on the specific values of the multipliers for the country in question, we cannot determine the exact numerical values of the multipliers. However, we can select the answer that reflects the correct signs for both multipliers. ‖ ∻Answer∻ Since all remaining choices A, B, C, and D have the correct signs for the government spending and tax multipliers, and we lack further information to distinguish between them, we cannot provide a single correct answer based on the information given. ∻Key Concept∻ ⚹Government spending multiplier is positive; tax multiplier is negative.⚹ ∻Explanation∻ ⚹Government spending increases economic output, while taxes decrease it, leading to their respective positive and negative multipliers.⚹◊What is the formula to calculate the total multiplier effect on the economy based on government spending and tax multipliers⍭ Generate me a similar question◊

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