Let g1 and g2 be the marginal propensity to spend of governments in economies1 and 2 respectively. g10, g20.

 Let g1 and g2 be the marginal propensity to spend of governments in economies1 and 2 respectively. g1>0, g2<0. Economy 1 employs a lump-sum tax system while economy 2 employs a proportional tax system. If the marginal propensity to consume and to import is identical in both economies, the multiplier of economy 1will be greater than the multiplier of economy 2. True or false, explain.

We have here two economies with the following multipliers: For the multiplier of economy 1 to be greater than the multiplier of economy 2, thedenominator of 2 must be greater than the denominator…