Suppose the government were to increase government purchases by $20 billion without changing the level of net taxes. this would shift the aggregate expenditure line by $ billion. after the multiplier process has run its course, the new level of equilibrium output will be $ billion, implying that the value of the relevant multiplier is . now, suppose the government were to decrease net taxes by $20 billion without changing the level of government purchases. this would shift the aggregate expenditure line by $ billion. after the multiplier process has run its course, the new equilibrium output will be $ billion, implying that the value of the relevant multiplier is . compare your results from the previous questions. for a given magnitude of fiscal policy (in this case, a $20 billion increase in government purchases or a $20 billion decrease in net taxes), the magnitude of the change caused by the increase in government purchases is the magnitude of the change caused by the decrease in taxes. what explains this result
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