Fill in the following table to show the impact of the change in investment spending on the first two rounds of consumption spending and, eventually, on total output and income.
Now consider a more realistic case. Specifically, assume that the government in our hypothetical economy collects income taxes. In this case, the multiplier will be ______ (options: the same as, smaller than, larger than) the oversimplified multiplier you found earlier.
Suppose that the price level in our economy remains the same and that there is still no international trade. Now, however, the government decides to implement an income tax of 5% on each dollar of income. The MPC and MPS, however, remain the same as before. In this case, after accounting for the impact of taxes, the multiplier in this economy is __________(1.0526, 2.3256, 2.5, 1.0309) , and a $250 billion increase in investment spending will lead to a _________ ($581.4, $257.73, $625, $263.16) billion _______ (decrease, increase) in output.