An Aide to a U

question 115

Multiple Choice

An aide to a U.S.Senator computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

• A) The actual MPC was larger than the MPC the aide used to compute the multiplier.
• B) The aide thought the tax cut would be permanent,but the actual tax cut was temporary.
• C) The increase in income shifted money demand less than the aide had anticipated.
• D) The increase in income resulted in investment rising more than the aide had anticipated.

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Definitions:

Vector

An organism, typically an insect, that transmits pathogens from one host to another, or a molecule used to insert DNA into a host cell in genetic engineering.

Bacterial Decomposers

Bacteria that break down dead organic material, contributing to the decomposition process and nutrient cycling in ecosystems.

Nitrogen

A chemical element with symbol N and atomic number 7, an essential component of all living organisms as part of amino acids, proteins, and nucleic acids.

Photoheterotrophs

Organisms that obtain their energy from sunlight but rely on organic substances for their carbon source.