If the MPS in an economy is .4, government could shift the aggregate demand curve leftward by $50 billion by
A. increasing taxes by $250 billion.
B. reducing government purchases by $20 billion.
C. increasing taxes by $50 billion.
D. reducing government purchases by $125 billion.
Answer: B
You might also like to view...
According to real business cycle models
A) the economy is normally operating below the natural rate of unemployment. B) unexpected changes in monetary policy are the major source of fluctuations in real GDP. C) the economy is normally at potential GDP. D) the long-run Phillips curve is negatively sloped.
Answer the following statements true (T) or false (F)
1. As the price of U.S. dollars decreases, more foreign currency is required to purchase dollars. 2. If the exchange rate between the U.S. dollar and the Swiss franc changes from 75 cents per Swiss franc to $1 per Swiss franc, the dollar has depreciated, since its value has declined. 3. Appreciation of the U.S. dollar encourages travel abroad by U.S. citizens. 4. Under a system of floating exchange rates, exchange rates are allowed to rise or fall according to supply and demand. 5. A nation on the gold standard would convert its currency into gold on demand.
Refer to the graph shown. If market price decreases from $7.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will:
A. decrease output from 850 to 750. B. produce 850 units of output. C. increase output from 650 to 750. D. continue to produce 850 units.
Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve?
A) An increase in interest rates B) A tax increase of 50 cents per gallon for gasoline C) An across-the-board reduction of wages in the manufacturing sector D) The passage of legislation mandating a reduction in automobile pollution E) The shutdown of plants and movement of production of goods abroad