Suppose That Government Purchases Increase by $200 and at the Same

question 6

Multiple Choice

Suppose that government purchases increase by $200 and at the same time autonomous net taxes are increased by $200. If there are neither income taxes nor net exports, the change in equilibrium real GDP demanded will

• A)depend on the value of the MPC
• B)be a $200 decrease
• C)be a $200 increase
• D)be equal to zero, since higher taxes exactly offset higher government spending
• E)be an increase by some amount greater than $200

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Definitions:

Recency Effect

A cognitive bias that inclines individuals to remember and give greater importance to the most recent information or experiences.

Memory Trace

A theoretical concept suggesting that memories are stored in the brain as physical or chemical changes.

Brain Structure

The physical form and organization of different parts of the brain, including lobes, hemispheres, and neural networks.

Lasting Physical Change

Lasting physical change denotes a permanent alteration in the physical state or appearance of an object or organism.