Which of the Following Statements Is Incorrect

question 123

Multiple Choice

Which of the following statements is incorrect?

• A) Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
• B) Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4.
• C) If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion.
• D) A government surplus is anti-inflationary; a government deficit is expansionary.

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Definitions:

Seriation

Placing objects in an order or series according to a property or trait.

Linear Thinking

A thought process that follows a straight, direct path to reach a conclusion or solution, often focusing on sequential steps.

Causality

The relationship between a cause and its effect, where one event is understood to be a consequence of the other.

Sophisticated

Having a refined knowledge of the world, complex or developed in a way that is not immediately obvious.