?Exhibit 16-4 Macro AD/AS Model
As shown in Exhibit 16A-4, assume the marginal propensity to consume equals 0.80. Using discretionary fiscal policy, federal government spending should be _________ in order to restore the economy from E1to full employment.
A. increased by $1.6 trillion
B. decreased by $1.6 trillion
C. increased by $.20 trillion
D. increased by $.20 trillion
Answer: A
You might also like to view...
If you save less because the government is going to tax you and later provide you with a benefit, then this reduction in savings is referred to by economists as the
A. asset substitution effect. B. induced retirement effect. C. slovenly effect. D. bequest effect.
The focal point of the Bretton Woods system was the:
a. Great Britain pound. b. institution of special drawing rights. c. U.S. dollar. d. gold reserve. e. management of commodity money.
A country, such as Argentina in 2002, that is buying its own currency to maintain a given exchange rate
a. has a balance of payments surplus. b. has an undervalued currency. c. has an overvalued currency. d. need not fear a "run" on its currency.
An action at which it is possible to change the activity level in only one direction is called:
A. an interior action. B. a boundary action. C. a limited action. D. a marginal action.