Suppose the Economy Is Operating at Its Full-Employment-Noninflationary GDP and the MPC

question 152

Multiple Choice

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is .75.The federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation.To sustain full-employment-noninflationary GDP,government must:

• A) reduce taxes by $28 billion.
• B) reduce transfer payments by $21 billion.
• C) increase taxes by $21 billion.
• D) increase taxes by $28 billion.

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Definitions:

CISG

The United Nations Convention on Contracts for the International Sale of Goods, a set of rules governing the sale of goods between businesses located in different countries.

Damages

Compensation sought or awarded in a lawsuit for harm or injury caused by the wrongdoings of another party.

Breach of Contract

The violation of any agreed-upon terms or conditions in a contract, which may result in legal consequences for the offending party.

Cover

A remedy in sales law allowing a buyer to purchase replacement goods if the seller fails to make delivery.