Use the Following Situation to Answer the Question : Situation

question 41

Multiple Choice

Use the following Situation to answer the question : situation 20-2 Assume a closed economy. Suppose that autonomous consumption equals $400, planned investment equals $500, government expenditure equals $200, net taxes equals $50, and the mpc equals 0.9.
-Using the information in Situation 20-2,if taxes increase by $10,then the equilibrium aggregate output will change by

• A)-$90.
• B)-$10.
• C)$10.
• D)$90.

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Definitions:

Unrealized Gain

An increase in the value of an asset that has not been sold yet; hence, the gain is not reflected in the income statement.

Stock Investment

The purchase of shares in a company with the expectation of earning a return in the form of dividends or capital gains.

Dividend

A portion of a company's earnings distributed to its shareholders as a return on their investment.

Short-Term Investments

Financial assets that are easily convertible into cash or are expected to be converted into cash within a short period, usually one year or less.