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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Definitions:

Silversmith

A craftsman specialized in shaping silver into fine items such as jewelry, utensils, and decorative pieces, often incorporating intricate designs and techniques.

John Singleton Copley

An American painter active in the 18th century, known for his portraits of important colonial figures and British nobility.

Paul Revere

An American silversmith and patriot in the American Revolution, best known for his midnight ride to alert colonial militia of British forces' approach.

Enlightenment Thought

A philosophical movement in the 17th and 18th centuries emphasizing reason, individualism, and skepticism toward traditional doctrines.