Explain Why the Size of the Government Spending Multiplier Is

question 46

Essay

Explain why the size of the government spending multiplier is smaller in an open economy than in a closed economy.

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Definitions:

Net Fixed Assets

The value of a company's property, plant, and equipment minus depreciation, representing long-term investments in physical assets.

Straight-line Basis

A method of calculating depreciation of an asset, which evenly spreads the cost over its useful life.

Operating Income

Earnings before interest and taxes (EBIT), which shows a company's profit from its core business operations.

Tax Payments

Tax Payments are the compulsory financial charges or levies paid to the government by individuals, businesses, or other legal entities to fund public expenditures.