If Government Expenditure Increases by $200 Billion and Taxes Simultaneously

question 21

Multiple Choice

If government expenditure increases by $200 billion and taxes simultaneously increase by $200 billion, then aggregate demand

• A) increases only if aggregate supply increases.
• B) increases no matter what happens to aggregate supply.
• C) remains the same.
• D) increases only if aggregate supply decreases.
• E) decreases no matter what happens to aggregate supply.

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Definitions:

Probability

A numeric scale between 0 and 1 that quantifies how likely an event is to take place.

z

In statistics, 'z' typically refers to a z-score, a measure of how many standard deviations an element is from the mean.

Standard Normal Random Variable

A random variable that has a normal distribution with a mean of 0 and a standard deviation of 1.

P

Sometimes used as shorthand for "P-value," which assesses the strength of evidence against a null hypothesis in statistical testing.