A Federal Reserve publication argued that the size of the multiplier “depends on the type of fiscal policy changes in question and the environment in which they are implemented.” a. What does the...

A Federal Reserve publication argued that the size of the multiplier “depends on the type of fiscal policy changes in question and the environment in which they are implemented.”

a. What does the author mean by “the type of fiscal policy changes in question”? Why does the type of policy

matter for the size of the multiplier?

b. What does the author mean by “the environment in

which they are implemented”? Would the size of the

multiplier be affected by how close real GDP is to

potential GDP? Briefly explain.

Source: Daniel J. Wilson, “Government Spending: An Economic

Boost?” Federal Reserve Bank of San Francisco Economic Letter, February 6,

2012.