Assume in a Closed Economy That the Equilibrium Level of Income

question 71

Multiple Choice

Assume in a closed economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result,

• A)the equilibrium level of real income and the price level will both remain unchanged.
• B)the equilibrium level of income will remain unchanged.
• C)the equilibrium level of income will rise to $420.
• D)the equilibrium level of income will rise to $430.

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Definitions:

Utility Level

A gauge of the pleasure or fulfillment obtained by a customer through the use of goods and services.

Consumer Satisfaction

Consumer satisfaction measures how products or services provided by a company meet or surpass a customer's expectation.

Necessities

Basic needs or essential items required for living and maintaining a good life.

Chain-Weighted Price Index

Cost-of-living index that accounts for changes in quantities of goods and services.