In an Open Economy with Government and Demand-Determined Output,an Increase

question 31

Multiple Choice

In an open economy with government and demand-determined output,an increase in the equilibrium level of national income could be caused by

• A)an increase in taxes at all levels of income.
• B)an increase in the desired level of imports at all levels of income.
• C)a decrease in desired consumption at all levels of income.
• D)a decrease in the desired level of saving at all levels of income.
• E)a decrease in government purchases.

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Definitions:

Output

The total amount of goods or services produced within a given period by a firm, industry, or economy.

Returns To Scale

The change in output resulting from a proportional change in all inputs (factors of production) in the long term, indicating whether the output increases, decreases, or stays the same.

Production Function

A mathematical expression that describes the relationship between inputs used in production and the output generated from those inputs.

Input

The resources used in the production process, such as labor, raw materials, and capital.