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Answer the following questions.

1) Compare the three multipliers that we have looked at for fiscal policy (concerning the effects of changes of debt-financed government spending, taxes, and balanced-budget government spending). Pay particular attention to their size relative to each other. (3)

2) Which factor determines the absolute size of the multipliers? What does this mean for the impact of changes in taxation, in the model but also when you consider actual fiscal policy? (1)

3) Why is the balanced-budget multiplier not equal to zero? (1)