Exhibit 11-2 Aggregate demand and supply model
Suppose the economy in Exhibit 11-2 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E2 by:
A. decreasing government tax revenue by approximately $33 billion.
B. decreasing government tax revenue by $750 billion.
C. increasing government tax revenue by $100 billion.
D. increasing government tax revenue by approximately $33 billion.
Answer: A
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The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm makes the maximum profit when the marginal cost of last item produced equals
A) $5. B) $10. C) $15. D) $20.
A U.S. citizen's gift for famine relief in Somalia would be considered a:
a. capital inflow. b. capital outflow. c. current account transaction. d. service trade transaction.
Economic analysis suggests that gains from specialization and exchange
a. will not be realized unless a central planning authority requires that all goods be produced by the low opportunity cost supplier. b. will be realized if individuals are allowed to pursue goals that are in their own self-interest. c. will not be realized unless business firms employ economists when making decisions about the proper combination of resources to utilize in the production process. d. will be realized if individuals place the public interest above the pursuit of their own self-interest.
The spillover effects of actions that affect the well-being of nonconsenting third parties are called
a. side components. b. externalities. c. free riders. d. internalizations.