The government wishes to close a recessionary gap by increasing national income by $700 billion. The MPC = 0.8 . Two policies are offered. Policy A calls for $180 billion in increased government spending and $50 billion in increased taxes. Policy B calls for $200 billion in increased government spending and $100 billion in increased taxes. Which of the following will increase the national income
by the desired $700 billion?
a. Both policies increase national income by $700 billion but Policy B offers a lower budget deficit.
b. Both policies increase national income by $700 billion and create equal budget deficits.
c. Neither policy increases national income by $700 billion.
d. Only Policy A increases national income by $700 billion.
e. Only Policy B increases national income by $700 billion.
D
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During a war, a government will often draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?
a. the value of the civilian goods no longer produced by the new soldiers b. the cost of feeding and clothing the new soldiers c. the dollar cost of the payroll d. the higher prices of civilian goods due to wartime shortages e. the cost of transporting the soldiers to combat
Which of the following is a current account transaction?
a. the purchase of a foreign engineering firm by a domestic investor b. the import of shoes by a domestic retailer c. a loan by a domestic bank to a foreigner d. a loan by a foreign bank to a domestic manufacturer
All economic systems must answer certain fundamental economic questions. Which is not one of these questions?
A. Who is to receive the output? B. What goods and services will be produced? C. How will the goods and services be produced? D. Which actions should government take to reduce inflation?
Labor unions did not become traditional or popular institutions until the
A. 1920s. B. 1940s. C. 1960s. D. 1980s.