If the Absolute Value of the Tax Multiplier Equals 1

question 299

Multiple Choice

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

• A)$250 billion
• B)$400 billion
• C)$640 billion
• D)None of the above are correct.Taxes should be increased in this case.

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The return on an investment with no risk of financial loss, often represented by government bonds.

Beta

A measure of a stock's volatility in relation to the overall market; indicates the relative risk of the investment.

Expected Rate of Return

The profit or loss one anticipates on an investment, considering all potential outcomes and their likelihoods.

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