Assume that an economy's real GDP multiplier is 2 and that this economy is in equilibrium at $500 billion. If the government wants to move this economy to full-employment at $600 billion, while maintaining a balanced budget, it must choose which of the following options?
a. Increase government spending and taxes by $100 billion
b. Decrease government spending and taxes by $100 billion
c. Increase government spending and taxes by $200 billion
d. Decrease government spending and taxes by $200 billion
a
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The long-run supply curve of a market for eggs is perfectly inelastic
Indicate whether the statement is true or false
Recall the Application about how having car insurance affects driving behavior to answer the following question(s).Recall the Application. The theory of moral hazard suggests that uninsured drivers drive less carefully than insured drivers.
Answer the following statement true (T) or false (F)
Mr. Smith is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 20 units for wine. Mr. Smith should
A. consume twice as much wine as beer. B. consume twice as much beer as wine. C. increase his consumption of beer relative to wine. D. increase his consumption of wine relative to beer.
The crowding-out effect is:
A. strongest when the economy is at full employment. B. strongest when the economy is in a deep recession. C. weakest when there is demand-pull inflation. D. equally strong, regardless of the state of the macroeconomy.