Exhibit 23-5 -If Output Was at the Level Corresponding to Point E

question 143

Multiple Choice

Exhibit 23-5
-If output was at the level corresponding to point E in Exhibit 23-5, then

• A)income would increase.
• B)aggregate output would decrease.
• C)it would be in equilibrium.
• D)the marginal propensity to consume would decrease.
• E)spending would decrease.

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Definitions:

Flat Tax Structure

A tax system with a constant marginal rate, usually applied to individual or corporate income.

Percentage

A ratio or fraction out of 100 that is used to express how large one quantity is relative to another quantity.

Marginal Rate

The rate of increase in a variable (e.g., tax rate, substitution, technical substitution) as another variable (e.g., income, quantity of another good) increases incrementally.

Increase

An upward movement in quantity, value, or some other measure, indicating growth or accumulation.