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In discussing the multiplier for government spending, WendyEdelberg and Louise Sheiner, economists at the BrookingsInstitution,...

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Economics

In discussing the multiplier for government spending, WendyEdelberg and Louise Sheiner, economists at the BrookingsInstitution, write: "The impact on GDP of an additional dollar offederal aid-whether to people, businesses, or state and localgovernments-depends on how much and how quickly each recelveddollar is spent (known as the Marginal Propensity to Consume, orMPC)." Source: Wendy Edelberg and Louise Sheiner, "What CouldAdditional Fiscal Policy Do for the Economy in the Next ThreeYears?" brookings.edu, October 9, 2020. a. What do they mean by the"impact on GDP"? By "impact on GDP," these economists are referringto A. the decrease in tax revenues that the policy will generate.B. the decrease in GDP because not every dollar of aid is spent. C.the increase in GDP because of this policy. D. the value of thegovernment spending multiplier.

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