If the Economy Is Already at Its Potential Output, Then

question 44

Multiple Choice

If the economy is already at its potential output, then the spending multiplier is _____

• A) equal to zero in the long run.
• B) infinite in the long run.
• C) equal to 1 in the long run.
• D) equal to zero in the short run.
• E) equal to 1 in the short run.

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Definitions:

Medicare Taxes

Medicare Taxes are federal payroll taxes that fund the Medicare program, typically deducted from an employee's paycheck.

W-2 Form

A tax form issued by employers to employees detailing the employee's annual wages and the amount of taxes withheld from their paycheck, critical for preparing individual income tax returns.

Form 1040

The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns.

Lookback Period

A set duration of time in the past during which relevant actions or financial transactions are reviewed for tax or regulatory purposes.