Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit. Which action will have the larger effect on equilibrium GDP?
A. The increase in taxes
B. The decrease in spending
C. The effects will be equal
D. Not possible to determine without knowing the multiplier
Answer: B
You might also like to view...
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. Refer to Table 13-2. What is the marginal profit from producing and selling the 5th case?
A. $10 B. $20 C. $30 D. $40
Explain why market power leads to a deadweight loss. Is the total deadweight loss from market power in the United States large or small?
What will be an ideal response?
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
The goal of antitrust laws is to
A. Prevent monopolies from forming. B. Control the structure of an industry or prevent the abuse of market power. C. Alter industry behavior only. D. Control the structure of an industry only.