Suppose That Congress Allocates $5 Billion to an "Energy-Efficient Appliance

question 54

Multiple Choice

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

• A)GDP does not change.
• B)GDP increases by $25 billion.
• C)GDP increases by $4 billion.
• D)GDP increases by $5 billion.

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Definitions:

Impairment Loss

A decrease in an asset's value recognized in financial statements when the asset's carrying amount exceeds its recoverable amount.

Carrying Value

The net amount at which an asset or liability is reported on the balance sheet, adjusted for factors such as depreciation or amortization.

Future Value

The value of an investment at a specific date in the future, considering compounding interest or investment returns.

Accretion Expense

Accretion expense relates to the gradual increase in the liability amount in an accretion bond or the process of asset value increase over time.