How much is government purchases multiplier for each nation

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Q. Two identical countries, Nation A and Nation B, can each be described by a Keynesian-cross model. MPC is .9 in each nation.

How much is government purchases multiplier for each nation?

How much is tax multiplier for each nation?

Nation A decides to increase spending by $2 billion, while Nation B decides to cut taxes by $2 billion. In which nation will new equilibrium level of income be greater? Please elucidate.

Reference no: EM1367821

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