You Are Hired by the Bureau of Economic Analogies (BEA)

question 139

Multiple Choice

You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $500 billion. The best estimate he has for the MPC is 0.75. Which of the following policies should you recommend?

• A) Reduce government spending by $500 billion and reduce taxes by $500 billion.
• B) Increase both government spending and taxes by $500 billion.
• C) Increase government spending by $500 billion and reduce taxes by $500 billion.
• D) none of the above

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Definitions:

Absolute Deprivation

Is a condition of extreme poverty.

Contagion Theory

A theory in sociology and psychology that explains how ideas, attitudes, and behaviors spread through populations as if they were infectious diseases.

Frame Alignment Theory

A sociological theory that explains the process by which individuals with similar values and beliefs align their activities and movements, often in the context of social movements.

Strain Theory

A sociological theory that posits individuals may resort to criminality due to pressures or strains from societal expectations and the inability to achieve them through legitimate means.