Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model. The MPC is .9 in each country.
1.How much is the government purchases multiplier for each country?
2.How much is the tax multiplier for each country?
3.Country A decides to increase spending by $2 billion, while Country B decides to cut taxes by $2 billion. In which country will the new equilibrium level of income be greater? Please explain.