In a Certain Year, the Aggregate Amount Demanded at the Existing

question 223

Multiple Choice

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government
Purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions,
The government should

• A) increase tax rates and/or reduce government spending.
• B) discourage personal saving by reducing the interest rate on government bonds.
• C) increase government expenditures.
• D) encourage private investment by reducing corporate income taxes.

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Definitions:

Dependent Variable

In statistical and mathematical analysis, the variable whose value is subject to the influence of another variable.

Horizontal Axis

In graphs and charts, this axis typically represents the independent variable or time period under examination.

Vertical Axis

The “up-down” or “north-south” measurement line on a graph or grid.

After-Tax Income

The amount of income left to an individual or business after all federal, state, and local taxes have been applied.