If Short-Run Equilibrium Output Equals 10,000, the Income-Expenditure Multiplier Equals

question 17

Multiple Choice

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then taxes must be ________ by approximately ________ to eliminate any output gap.

• A)decreased; 250
• B)decreased; 200
• C)increased; 250
• D)increased; 200

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Definitions:

Simplicity

The characteristic of being easy to understand or uncomplicated in nature.

Yea-Saying

A response bias in surveys or questionnaires where participants tend to agree with statements regardless of their actual opinions.

Probability

The likelihood that a given event (among a specific set of events) will occur.

Double-Barreled

Questions or statements that address more than one issue at a time, often leading to confusion or difficulty in answering.