Assume the MPC is 0.80. If the government wants to eliminate an AD shortfall of $300 billion, it should
A. Cut taxes by $75 billion.
B. Increase taxes by $60 billion.
C. Cut taxes by $240 billion.
D. Cut taxes by $60 billion.
Answer: A
You might also like to view...
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
In an economy with no income taxes or imports, if the MPC is .75, the multiplier is
A) 0.50. B) 4.00. C) 0.33. D) 3.00. E) 0.25.
Which of the following is an example of positive technological change?
A) A firm conducts a new advertising campaign. As a result, the demand for the firm's surf boards increases. B) A firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards. C) A firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards. D) A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.
Despite the large federal deficits during the last few decades, public capital in the U.S. declined because: a. a growing share of the federal budget goes toward income redistribution, especially for the elderly. b. of less labor productivity
c. of increasing farm subsidies. d. of the growing portion of the national debt owed to foreigners. e. a growing share of the federal budget goes toward income redistribution, especially for national defense