If a $10 Billion Decrease in Lump-Sum Taxes Increases Equilibrium

question 54

Multiple Choice

If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion,then:

• A) the multiplier is 4.
• B) the MPC for this economy is .8.
• C) the MPC for this economy is .6.
• D) the multiplier is 3.

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Definitions:

Stress

A condition or feeling experienced when a person perceives that demands exceed the personal and social resources the individual is able to mobilize.

Homeostasis

The ability of a living system to maintain a stable internal environment despite changes in external conditions.

Nervous System

The network of nerve cells and fibers that transmits nerve impulses between parts of the body, coordinating its actions and sensory information.

Stable Environment

An environment where conditions remain relatively constant over time, allowing for the maintenance of ecosystem equilibrium.