If No Fiscal Policy Changes Are Made, Suppose the Current

question 25

Multiple Choice

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

• A) government spending by $250 billion.
• B) taxes by $100 billion.
• C) taxes by $1,000 billion.
• D) government spending by $1,000 billion.

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Definitions:

Asexual Reproduction

The process by which an organism creates a genetically identical or nearly identical copy of itself without involving the genetic material of another organism.

Mutualistic

A type of symbiotic relationship between two different species in which each benefits from the other.

Mycorrhizal Fungus

Fungi that form beneficial symbiotic relationships with the roots of plants, improving water and nutrient absorption for the plant and receiving carbohydrates in return.

Plant Root

The part of a plant that typically lies below the surface of the soil and functions in anchorage, water and nutrient absorption, and sometimes in storage.