Exhibit 17-2 Aggregate Demand and Supply Model

question 115

Multiple Choice

Exhibit 17-2 Aggregate demand and supply model

-Suppose the economy in Exhibit 17-2 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 $6.1 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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Definitions:

Margin

Net operating income divided by sales.

Turnover

Sales divided by average operating assets.

Manufacturing Cycle Efficiency

A metric that measures the efficiency of the manufacturing process by comparing the value-added production time to the total production time.

Non-value-added Time

Time spent in the production process that does not contribute to the end product's value or quality, often targeted for reduction in lean manufacturing practices.