The Introduction of a $100 Autonomous Net Tax in an Economy

question 13

Multiple Choice

The introduction of a $100 autonomous net tax in an economy with an MPC equal to 0.8 will,at each level of real GDP,

• A)increase equilibrium real GDP demanded by $100
• B)decrease equilibrium real GDP demanded by $100
• C)increase equilibrium real GDP demanded by more than $100
• D)decrease equilibrium real GDP demanded by less than $100
• E)decrease equilibrium real GDP demanded by more than $100

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Definitions:

Paper Money

Currency in the form of paper notes, issued by the government or central bank, representing a claim on the issuing country's government.

Gold

A precious metal that is used as an investment, a hedge against inflation, and in various industrial and jewelry applications, known for its value retention over time.

U.S. Currency

The money that is legally in use in the United States, consisting mainly of Federal Reserve Notes (dollar bills).

Federal Reserve

The central banking system of the United States, responsible for monetary policy, including regulation of money supply and interest rates.