Consider Two Fiscal Policy Actions

question 147

Multiple Choice

Consider two fiscal policy actions. JI. a $400 billion reduction in income taxes
JII) a $400 billion increase in government purchases
JWhich policy will have a bigger impact on aggregate demand?

• A) Both policies will have the exact same impact.
• B) Policy II because it affects aggregate demand directly.
• C) Policy I because it affects disposable income directly.
• D) Policy I because it works through consumption which is the largest component of aggregate demand.

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Definitions:

Dependent Variable

A variable in scientific research that is affected by other variables, measured to test the effect of the independent variable.

Loudness of Music

The perceived volume of music, which can vary based on the sound's intensity and the listener's sensitivity.

Loudness of Music

The perception of sound intensity, typically measured in decibels, reflecting how loud or soft music appears.

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to observe its effects on the dependent variable.