If the MPC is 0.8 and net taxes increase by $100 billion, what is the effect on equilibrium output?
a. There is no effect; equilibrium output is not affected by a change in net taxes.
b. Equilibrium output will fall by $80 billion.
c. Equilibrium output will fall by $125 billion.
d. Equilibrium output will fall by $400 billion.
e. Equilibrium output will fall by $500 billion.
D
You might also like to view...
An increase in the expected inflation rate will
A) shift the short-run Phillips curve to the right. B) reduce the inflation rate. C) shift the short-run Phillips curve to the left. D) reduce the unemployment rate.
Which of the following are possible justifications for government redistribution of income?
a. The desire for a more unequal distribution of income. b. Charity is a collective consumption good and thus might be underprovided. c. Redistribution acts as insurance against further coercion. d. Private redistribution of income merely shuffles money around the rich and upper-middle class.
If the Federal Reserve is engaging in open market operations designed to expand the money supply, it is probably
a. selling government securities to banks. b. selling government securities to the public. c. buying government securities from the public. d. encouraging banks to exchange their Fed deposits for currency.
Which of the following is a subtle way for a company to reassure their competitors that it is committed to a tit-for-tat strategy?
A. Offering a commitment strategy B. Setting prices below cost C. Collusion D. Price-matching guarantees