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

question 33

Multiple Choice

During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

• A) $333 billion
• B) $300 billion
• C) $250 billion
• D) $750 billion

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Definitions:

Divergent Thinking

A thought process or method used to generate creative ideas by exploring many possible solutions.

True Creativity

The ability to generate ideas or products that are both novel and valuable, reflecting genuine innovation.

Terman

Refers to Lewis Terman, an American psychologist best known for his revisions of the Stanford-Binet Intelligence Scales and research on gifted children.

Academic Genius

This term describes an individual with exceptional intellectual ability or academic achievement, often manifesting in breakthrough insights or outstanding scholarly work.