Suppose the Price Level Is Fixed, the MPC Is 0

question 119

Multiple Choice

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $80 billion.To achieve full-employment output (exactly) , government should

• A)increase government expenditures by $80 billion.
• B)reduce government expenditures by $40 billion.
• C)reduce taxes by $40 billion.
• D)reduce taxes by $80 billion.

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Definitions:

Authority Decisions

relate to choices or judgments made by individuals or bodies holding power or command within an organization.

Manager

An individual responsible for directing, controlling, and administering an organization or group, overseeing tasks, and making decisions.

Confirmation Error

The tendency to seek confirmation for what is already thought to be true and not search for disconfirming information.

Selective Perception

The tendency to define problems from one’s own point of view.