Suppose a $100 Autonomous Net Tax Is Introduced in an Economy

question 72

Multiple Choice

Suppose a $100 autonomous net tax is introduced in an economy with an MPC equal to 0.7.How will this affect consumption at each level of real GDP?  

• A) Consumption will increase by $100. 
• B) Consumption will decrease by $100. 
• C) Consumption will increase by $70. 
• D) Consumption will decrease by $70.

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Definitions:

Equifinality

The principle that in open systems, the same end state can be reached from different initial conditions and by a variety of paths.

Same End

Achieving the same outcome or goal despite possibly using different means.

Output

The final product, result, or amount of something produced by a process, system, or activity.

Communication Flow

The movement and direction of information within an organization or between individuals, including how effectively information is shared.