During a Recession, Analysts at the CBO Project That the Economy

question 87

Multiple Choice

During a recession, analysts at the CBO project that the economy is operating $1.5 trillion below potential output. Assuming the MPC is 0.8, by how much would the government have to cut taxes to restore potential output?

• A) $375 billion
• B) $300 billion
• C) $1.2 trillion
• D) $800 billion

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Consequences intended to reduce the likelihood of a behavior occurring again, usually seen as unpleasant or undesirable by the recipient.

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