In 2016, economists forecast the U.S. MPS will be 0.15 and the MPM will be 0.10.Estimate the maximum overall total effect on national income of the following two changes in fiscal policy:
a) If a decrease in govt spending of $100 billion and a decrease in taxes of 50 billion.
b) If fiscal policy is unchanged (ignore part a above) but GPDI from business increases as below, what will be the maximum impact on national income?
An increase in planned business investment spending of $60 billion without any change in fiscal policy.
c) What are some reasons why the maximum multiplier effect might not happen in the U S?