Suppose That the Government Spending Multiplier Is 2

Multiple Choice

Suppose that the government spending multiplier is 2.7 and the tax multiplier is 3.8.This means that,if prices are constant,a $400 billion rise in government spending will __________________,and a $400 billion cut in taxes will _____________________.

A) raise Real GDP by $1,080 billion; raise Real GDP by $1,520 billion
B) lower Real GDP by $1,080 billion; lower Real GDP by $1,520 billion
C) raise Real GDP by $148 billion; raise Real GDP by $105 billion
D) lower Real GDP by $148 billion; lower Real GDP by $105 billion