Assume That an Economy's Real GDP Multiplier Is 2 and That

question 46

Multiple Choice

Assume that an economy's real GDP multiplier is 2 and that this economy is in equilibrium at $500 billion. If the government wants to move this economy to full-employment at $600 billion, while maintaining a balanced budget, it must choose which of the following options?

• A) Increase government spending and taxes by $100 billion
• B) Decrease government spending and taxes by $100 billion
• C) Increase government spending and taxes by $200 billion
• D) Decrease government spending and taxes by $200 billion

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Definitions:

Retiree

An individual who has withdrawn from active working life, typically due to age.

Earned

Obtained or received as a result of effort or achievement.

Older People

Individuals who are advanced in age, often defined as being 65 years old or older.

Ill-Tempered

Often exhibiting anger or irritation.