Part A. When government spending increases by $1, planned expenditures increases by $1
a) and the equilibrium level of income will increase by $1
b) and the equilibrium level of income will increase by $1 times the spending multiplier
c) and the equilibrium level of income will increase by less than $1
Part B. When taxes are cut by $1, planned expenditures
a) increase by less than $1, and the equilibrium level will increase by $1 times the tax multiplier
b) increase by $1 and the equilibrium level of income will increase by $1 times the tax multiplier
c) increase by $1 and the equilibrium level of income will increase by $1 times the spending multiplier