If the Time Path of Government Purchases Does Not Change

question 38

Multiple Choice

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

• A)real GDP falls.
• B)real consumption falls.
• C)real gross investment does not change.
• D)all of the above.

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Definitions:

Combined Residual Income

The total leftover income from various projects or divisions after accounting for required rate of return or capital costs.

Required Rate Of Return

The minimum expected yield by investors to justify the risk of an investment.

Investment Opportunity

An investment opportunity refers to potentially lucrative financial ventures or assets that individuals or entities can invest in, aiming for future monetary returns.

Turnover

A metric indicating the rate at which a company's inventory is sold and replaced over a given period.