If the Absolute Value of the Tax Multiplier Equals 1

question 261

Multiple Choice

If the absolute value of the tax multiplier equals 1.6, real GDP is $1.3 trillion, and potential real GDP is $1.34 trillion, then taxes would need to be cut by ________ to restore the economy to potential real GDP.

• A)$15 billion
• B)$25 billion
• C)$40 billion
• D)$64 billion
• E)None of the above is correct.Taxes should be increased in this case.

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Definitions:

Joy Partner's Withdrawals

Distributions of assets from a partnership to one of its partners, typically for personal use.

Closed

In accounting, refers to accounts that have been zeroed out at the end of an accounting period to prepare them for the next period.

Debit

A bookkeeping entry that increases the balance of asset and expense accounts, and decreases equity, liability, and revenue accounts.

Partnership Liquidation

The process of closing down a partnership by selling off assets, paying liabilities, and distributing the remaining assets to the partners.