help

[varnika1880]

Suppose the income multiplier with respect to government spending is 3.5, the money multiplier is 4.5 and the income multiplier with respect to the money supply is 2.5. What change in the equilibrium level of income would result if government spending were reduced by $1000 and at the same time the central bank purchased bonds worth $2000?

a) less than or equal to $5000                      

b) between $5000 and $10,000

c) between $10,000 and $20,000                

d) more than $20,000
ans is c but i dont know how

[Akash]

Change in income due to fiscal policy=-1000*3.5= -3500

Money supply change=2000*4.5=9000
Change in income due to monetary policy =9000*2.5= 22500

Net= 19000

[varnika1880]

THNX AKASH  can anyone plz help with this

       

If "the" multiplier is 6, the income multiplier with respect to the money supply is 4, and the money multiplier is 5, then to increase income by $50 billion dollars the policy authorities could

a) increase the money supply by $2.5 billion

b) increase government spending by $10 billion

c) increase both government spending and the money supply by $4 billion

d) increase government spending by $3 billion and the money supply by $8 billion
ans is d ....but i dont know the formulas plz help

[Var1995]

'the' multiplier is income multiplier with respect to government. change in income due to increased govt. spending will be 18 billion dollars( 3 billion dollars*6) and due to money supply: 32 billion dollars. total is 50, as desired.

[varnika1880]

Thanks a lot