(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given

question 105

Multiple Choice

(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table above, assume full employment income is $1,000 while the current equilibrium is $750. Now let exports rise by 50 and imports fall by 50. If the government wants to eliminate the recessionary gap while maintaining a balanced budget:

• A) it must increase spending by $100 and decrease taxes by $100.
• B) it must increase spending by $250 decrease taxes by $250.
• C) it must increase spending by $100 and increase taxes by $100.
• D) it must increase spending by $250 increase taxes by $250.

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Definitions:

Accounting System

A structured process used to record, track, and manage financial transactions and the financial position of an entity.

Standards

Preset criteria or benchmarks used to measure, compare, or judge quality, performance, or compliance.

Fully Efficient

Describes a state in which resources, including time, labor, and materials, are optimized to achieve maximum productivity and minimal waste in operations or processes.

Efficient Level

An operational state where a system or process operates at maximum capacity with the least waste of resources.