Suppose the marginal propensity to consume is 0.75 . If government purchases increase by $100 billion and the extra expenditure is financed with a net tax of $100 billion, by how much will output change?
a. -$400 billion
b. $100 billion
c. $400 billion
d. $0
e. -$100 billion
B
You might also like to view...
Suppose that the total fixed cost of producing five sailboats is $4,000 . total variable cost is $4,000 . and the total cost of producing six sailboats is $10,000 . The marginal cost of the sixth sailboat is:
a. $2,000. b. $4,000. c. $8,000. d. $10,000. e. $6,000.
Analysis of the Great Depression indicates that
a. even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. b. even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. c. a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. d. the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies.
Liquidity preference theory is most relevant to the
a. short run and supposes that the price level adjusts to bring money supply and money demand into balance. b. short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. c. long run and supposes that the price level adjusts to bring money supply and money demand into balance. d. long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.
The art of monetary policy requires acting in accordance with the Taylor Rule.
Answer the following statement true (T) or false (F)