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:

Financial Statement Forecasts

Projections or estimates of a company's future financial performance, including income statements, balance sheets, and cash flows.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life.

Collateral

Assets pledged by a borrower to secure a loan or other credit, and subject to seizure by the lender if the loan is unpaid.

Bondholder

An investor or owner of bonds issued by a corporation or government entity, entitled to receive interest payments and the return of principal.