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.

---

Definitions:

Quantity Output

The total amount of goods or services produced by a business, sector, or economy.

Noncooperative Behavior

Actions by firms that ignore the effects of those actions on the profits of other firms.

Marginal Costs

The cost incurred by producing one additional unit of a product.

Industry Output

The total product or service produced by companies within a specific sector or industry.