If government increases spending and wants to maintain a balanced budget, it should
A) increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier.
B) decrease taxes by an equal amount.
C) increase taxes by an equal amount.
D) decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier.
C
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The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P. Suppose the economy is closed. The equilibrium price of a car is ________ and equilibrium quantity is____.
A. $8,000; 12,000 B. $6,000; 14,000 C. $12,000; 8,000 D. $10,000; 10,000
An example of rational behavior in economics is
a. a firm seeking to minimize its losses in an economic downturn. b. a consumer wanting to maximize satisfaction. c. a country looking to maximize its output. d. All of these.
Firms in perfectly competitive markets who wish to maximize profits should produce:
A. more as long as marginal cost is greater than marginal revenue. B. less as long as marginal cost is less than marginal revenue. C. at the level where marginal cost equals marginal revenue. D. All of these are true.
Suppose real GDP is $800 billion when the MPC is 0.80, and people decide to increase their saving by $30 billion. Before this change, the economy was in equilibrium with people intending to save $100 billion and producers intending to invest $100 billion. The new equilibrium level of real GDP is:
a. $600 billion. b. $650 billion. c. $680 billion. d. $730 billion. e. $800 billion.