An Aide to a U

question 115

Multiple Choice

An aide to a U.S.Senator computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

• A) The actual MPC was larger than the MPC the aide used to compute the multiplier.
• B) The aide thought the tax cut would be permanent,but the actual tax cut was temporary.
• C) The increase in income shifted money demand less than the aide had anticipated.
• D) The increase in income resulted in investment rising more than the aide had anticipated.

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Definitions:

Atomic Number

The atomic number is equal to the number of protons (positively charged particles) in the nucleus of an atom.

Element

A pure chemical substance consisting of one type of atom distinguished by its atomic number.

Nucleus

The central and most important part of an atom, containing protons and neutrons and almost all of its mass.

Matter

Anything that occupies space and has mass, composed of atoms or molecules and is the substance that makes up the physical universe.