Business, 21.04.2020 23:24, ashiteru123

Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.8, while the other comes up with an estimate of 1.4. Explain why these estimates are different in terms of the assumptions that each economist is making. A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed. B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both. C. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both. D. Unlike the first economist, the second economist must be assuming that the government expenditure is devoted to useful projects.

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Two economists estimate the government expenditure multiplier and come up with different results. On...