Suppose President Obama Is Successful in Passing a $5 Billion

question 31

Multiple Choice

Suppose President Obama is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

• A)There is a $20 billion increase in equilibrium GDP.
• B)There is a $20 billion decrease in equilibrium GDP.
• C)There is a $15 billion increase in equilibrium GDP.
• D)There is a $15 billion decrease in equilibrium GDP.

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Definitions:

Independently Acting

Refers to an entity or person making decisions based on their own judgments or interests without coordination with others.

Product Scarcities

Situations where the supply of a product is insufficient to meet demand, often leading to increased prices and competition for available stock.

Private Property

Private property refers to the rights individuals or organizations have to own, use, and dispose of land, buildings, goods, or intellectual property privately, without interference from the government.