Suppose President Obama Is Successful in Passing a $5 Billion

question 31

Multiple Choice

Suppose President Obama is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

• A)There is a $20 billion increase in equilibrium GDP.
• B)There is a $20 billion decrease in equilibrium GDP.
• C)There is a $15 billion increase in equilibrium GDP.
• D)There is a $15 billion decrease in equilibrium GDP.

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Definitions:

General Partner

An owner of a partnership who has unlimited liability and is responsible for the management of the partnership.

Liability For Firm Debts

Obligations a company must meet, including all debts and financial responsibilities.

Agency Cost

Costs that arise from conflicts of interest between managers and shareholders within a company.

Executive Overseas

A managerial position held within a company's operations located in a foreign country.