Suppose That the Government Increases Expenditures by $150 Billion While

question 204

Essay

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?

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Definitions:

Thalamus

Part of the limbic system located in the center of the brain, this structure relays sensory information from the lower part of the brain to the proper areas of the cortex and processes some sensory information before sending it to its proper area.

Cannon-Bard Theory

A theory of emotion that argues physical arousal and emotional experience occur simultaneously but independently.

Emotion

A complex psychological state involving an individual's physiological response, subjective experience, and behavioral expression in response to stimuli.

Facial Feedback Hypothesis

Theory of emotion that assumes that facial expressions provide feedback to the brain concerning the emotion being expressed, which in turn causes and intensifies the emotion.