Which of the Following Is the Best Choice to Eliminate

question 80

Multiple Choice

Which of the following is the best choice to eliminate a recessionary gap if the desired fiscal stimulus is $10 billion and the aggregate demand shortfall is $100 billion,while the MPC is 0.90?

• A)Tax hike of $11.11 billion.
• B)Tax cut of $11.11 billion.
• C)Tax hike of $10 billion.
• D)Tax cut of $10 billion.

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Definitions:

Indifference Curve

A graph showing different combinations of two goods that provide the same level of utility or satisfaction to a consumer.

Utility

In economics, a measure of satisfaction, usefulness or value that an individual gains from consuming goods and services.

Consumption Bundle

A combination of goods and services selected by a consumer for personal use.

T-Shirts

A basic item of clothing characterized by short sleeves, generally made of cotton, and lacking a collar.