To combat a recession, the Indian government enacts expansionary fiscal policy, which increases government spending by 2 trillion rupees. In response, GDP increases by 6 trillion rupees. a. What is the multiplier? b. Illustrate the impact of this expansionary fiscal policy on the Indian economy using an AD-AS graph. c. How will the price level change?

To combat a recession, the Indian government enacts expansionary fiscal policy, which increases government spending by 2 trillion rupees. In response, GDP increases by 6 trillion rupees. a. What is the multiplier? b. Illustrate the impact of this expansionary fiscal policy on the Indian economy using an AD-AS graph. c. How will the price level change?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 6P

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