Exhibit 15-5  Aggregate Demand and Supply Model Suppose the Economy

question 201

Multiple Choice

Exhibit 15-5  Aggregate demand and supply model Suppose the economy in Exhibit 15-5 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E₂ and reduce inflation by:

• A) increasing government tax revenue by $6 billion.
• B) decreasing government tax revenue by $6.2 billion.
• C) decreasing government tax revenue by $200 billion.
• D) increasing government tax revenue by approximately $66 billion.
• E) decreasing government tax revenue by approximately $66 billion.

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Rapidly formed judgments based on “gut feelings” or “instincts.”

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Psychological tendencies expressed by evaluating a particular entity with some degree of favor or disfavor.

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Widely shared beliefs about the characteristic traits, attitudes, and behaviors of members of various social groups (racial, ethnic, or religious), including the assumption that the members of such groups are usually all alike.

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The mental action or process of acquiring knowledge and understanding through thought, experience, and the senses.