If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally (shift rightward) by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.90, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:
a. government spending by $100 billion.
b. taxes by $100 billion.
c. taxes by $1,000 billion.
d. government spending by $1,000 billion.
a
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An external cost, such as the cost generated by pollution, is
A) a cost paid by consumers of the product. B) a cost paid by producers of the product. C) a cost paid by a third party or by society at large. D) not a true opportunity cost of production.
Which of the following is not correct?
a. The U.S. economy has never experienced deflation. b. Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. c. Since 1965, the U.S. economy has experienced rising consumer prices in most years. d. During deflation, the real interest rate exceeds the nominal interest rate.
If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be ________ the quantity that maximizes total economic surplus.
A. more equitable B. lower than C. higher than D. equal to
An increase in the money supply, all else held constant, usually ________.
A. increases the interest rate and increases aggregate demand B. decreases the interest rate and increases aggregate demand C. increases the interest rate and decreases aggregate demand D. decreases the interest rate and decreases aggregate demand