Suppose Inflation Is a Threat Because the Current Aggregate Demand

question 61

Multiple Choice

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

• A) decreasing tax revenues by $600 billion.
• B) decreasing government spending by $200 billion.
• C) increasing tax revenues by $200 billion.
• D) increasing government purchases by $150 billion.

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Definitions:

Hippocampus

A critical structure within the brain involved in memory formation, navigation, and the processing of emotional responses.

Apraxia

A motor disorder caused by damage to the brain, characterized by difficulty in performing tasks or movements when asked, despite having the desire and the physical ability to do them.

Agnosia

A disorder marked by the inability to recognize or interpret sensory information, despite having functioning sensory pathways.

Aphasia

A condition resulting from damage to the parts of the brain responsible for language, leading to difficulties in speaking, reading, writing, or understanding language.