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

question 65

Multiple Choice

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, the mpc equals 0.9, and potential output (Y*) equals 9,000, then taxes must be increased by approximately ________ to eliminate any output gap.

• A)90
• B)100
• C)111
• D)1,000

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