In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that during wartime,the military expenditures multiplier would be ________ the administration's estimate of the government purchases multiplier,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that when short-term interest rates are zero,the government purchases multiplier would be ________ the administration's estimate.

Question

Quizplus · Accepted Answer

According to the information given, economist Robert Barro argues that during wartime, the government purchases multiplier would be lower than the administration's estimate. This indicates that the multiplier would be less effective in stimulating the economy during wartime. Economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo also argue that when short-term interest rates are zero, the government purchases multiplier would be higher than the administration's estimate. This suggests that the multiplier would be more effective in stimulating the economy when short-term interest rates are low. Therefore, the best choice is B.

In Preparing Their Estimates of the Stimulus Package's Effect on GDP,Obama