In an Aggregate Expenditures Diagram Equal Increases in Government Spending

question 205

Multiple Choice

In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

• A)shift the aggregate expenditures line downward.
• B)shift the aggregate expenditures line upward.
• C)not affect the aggregate expenditures line.
• D)reduce the equilibrium GDP.

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Definitions:

Federal Income Tax

The federal government's imposition of a financial charge on the yearly profits of individuals, corporations, trusts, and different legal organizations.

FICA Base Limit

The maximum amount of earnings subject to the Social Security portion of the Federal Insurance Contributions Act tax in a given year.

FICA-OASDI

Federal Insurance Contributions Act - Old Age, Survivors And Disability Insurance, a U.S. payroll tax funding Social Security and Medicare.

Maximum Earnings Limit

The upper threshold of income that can be taxed for specific purposes, such as Social Security, beyond which no additional taxes are levied on income.