Assume an economy with an upward-sloping aggregate supply curve and an MPC of .80 . An increase in investment spending of $50 billion will most likely increase total income by
a. $200 billion.
b. $40 billion.
c. more than $200 billion.
d. more than $50 billion but less than $250 billion.
d
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Yes. As deficit spending goes up, it is likely government borrowing will, too. Then foreign residents who lend funds to the U.S. government have less to spend on our goods, so U.S. exports will fall.
Answer the following statement(s) true (T) or false (F)
If the Fed wished to decrease GDP, it could
A) increase the reserve requirement or conduct an open market sale. B) increase the reserve requirement or conduct an open market purchase. C) decrease the reserve requirement or conduct an open market sale. D) decrease the reserve requirement or conduct an open market purchase.
What is a black market, and under what economic condition is it most likely to thrive?
What will be an ideal response?
When the economy has an income tax that is variable, the multiplier is
A. unchanged. B. larger. C. smaller. D. unpredictable.