How Does an Increase in Government Transfer Payments Affect Aggregate

question 39

Multiple Choice

How does an increase in government transfer payments affect aggregate demand?

• A)It has the same effect as a tax increase, which lowers AD with a larger multiplier than a spending decrease.
• B)It has the same effect as a tax cut, which increases AD but with a smaller multiplier than a change in spending.
• C)It has the same effect as a spending increase, which increases AD with a larger multiplier than a tax cut.
• D)It has the same effect as a spending decrease, which increases AD with a larger multiplier than a spending decrease.

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Definitions:

Parallel Processing

Parallel processing is the ability of the brain to simultaneously process incoming stimuli of differing quality. It's a part of the brain's natural mode of information processing for many functions.

Sequential Processing

The processing of information in a specific order, often linear, where one process leads directly to the next.

Parallel Processing

is the brain's capability to process multiple aspects of a problem or visual scene at the same time, enhancing speed and efficiency in cognitive functions.

Sequential Processing

The method of processing information in a linear, step-by-step manner, often associated with analytical and logical reasoning.