Suppose That Congress Allocates $5 Billion to an "Energy-Efficient Appliance

question 54

Multiple Choice

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

• A)GDP does not change.
• B)GDP increases by $25 billion.
• C)GDP increases by $4 billion.
• D)GDP increases by $5 billion.

Grasp the Efficient Markets Hypothesis (EMH) and its implications for capital market pricing.

Identify the forms of market efficiency and their implications for trading and investment strategies.

Describe the components and calculations involved in nominal and real rates of return.

Recognize the significance and challenges of predicting stock prices in efficient markets.

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Definitions:

Allowance Method

An accounting technique used to estimate uncollectible accounts receivable and record bad debts expense.

Percent of Sales Method

A financial forecasting technique that estimates certain balance sheet and income statement items as a fixed percentage of projected sales.

Uncollectible Expenses

Costs that a business incurs from credits extended to customers that are not expected to be paid back, often recognized as bad debt expense.

Credit Sales

Sales made by a business where the payment is deferred to a later date, typically recorded as accounts receivable until payment is received.