Suppose Aggregate Output Is Demand-Determined

question 88

Multiple Choice

Suppose aggregate output is demand-determined.If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending,then equilibrium income will ________ and the marginal propensity to spend must equal ________.

• A)decrease by $40 billion; 0.75
• B)decrease by $10 billion; 0.25
• C)increase by $40 billion; 0.25
• D)increase by $40 billion; 0.75
• E)increase by $10 billion; 4.0

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Definitions:

Government Spending

The total amount of money expended by the government on various services, infrastructure, and public welfare.

Tax Revenues

The income gained by governments through taxation, which is used to fund public services and infrastructure.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries they are supposed to regulate, leading to policies that benefit the industry at the expense of the public interest.

Securities And Exchange Commission

A federal agency responsible for regulating the securities industry, enforcing federal securities laws, and protecting investors in the United States.