In an article regarding Bangladeshʹs economy, the author suggests that the government ...ʺ[g]ive double tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax break on donations to educational institutions.ʺ
Suppose the multiplier in Bangladesh is 2. If the government enacts the proposed policies and__________ , aggregate expenditure __________in the short run.

Question

Quizplus · Accepted Answer

The multiplier effect states that an increase in autonomous expenditure will lead to a larger increase in aggregate expenditure. In this case, the government is proposing to increase autonomous expenditure by $10 billion through tax breaks. The multiplier is 2, so this will lead to an increase in aggregate expenditure of $20 billion.

In an Article Regarding Bangladeshʹs Economy, the Author Suggests That