Suppose That the Government Spending Multiplier Is 3

Multiple Choice

Suppose that the government spending multiplier is 3.2 and the tax multiplier is 2.9.This means that,if prices are constant,a $200 billion rise in government spending will __________________,and a $200 billion cut in taxes will _____________________.

A) raise Real GDP by $640 billion; raise Real GDP by $580 billion
B) lower Real GDP by $640 billion; lower Real GDP by $580 billion
C) raise Real GDP by $62.5 billion; raise Real GDP by $69 billion
D) lower Real GDP by $62.5 billion; lower Real GDP by $69 billion