A fiscal policy action to close an expansionary gap is to:
A. increase the marginal propensity to consume.
B. increase taxes.
C. increase government purchases.
D. increase transfer payments.
Answer: B
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Answer the following statement true (T) or false (F)
A value of the absolute price elasticity of demand equal to 0.25 indicates that
A) a 10% decrease in price leads to a 4% increase in quantity demanded. B) a 10% decrease in price leads to a 25% increase in quantity demanded. C) a 1% decrease in price leads to a 2.5% increase in quantity demanded. D) a 0.25% decrease in price leads to a 1% increase in quantity.
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