I received half credit for these answers. Where did I go wrong? What are the cor

Question

I received half credit for these answers. Where did I go wrong? What are the correct solutions?

Assuming a fixed amount of taxes and a closed economy and that the marginal propensity to consume equals 0.60, calculate the value of the following multipliers. Be sure to use a negative sign(-) to show if a multiplier has a negative value. The government purchases multiplier equals (enter your response rounded to one decimal place). The tax multiplier equals (enter your response rounded to one decimal place). The balanced budget multiplier equals (enter your response rounded to one decimal place.)

Explanation / Answer

Goverment purchases multiplier = 1 / (1 - MPC) = 1 / (1 - 0.60) = 2.5

Tax multiplier = MPC / (1 - MPC) = 0.60 / (1 - 0.60) = 1.5

Balanced budget multiplier = Goverment purchases multiplier - Tax multiplier = 2.5 - 1.5 = 1

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