Suppose the Economy Is Operating at an Output of $4,000

question 4

Multiple Choice

Suppose the economy is operating at an output of $4,000 billion. Assume furthermore that potential output is $5,000 billion and the marginal propensity to consume is 0.75. _____ would close this recessionary gap.

• A)A $25 billion increase in government spending
• B)A $25 billion increase in taxes
• C)A $250 billion increase in government spending
• D)A $1,000 billion increase in government spending

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Definitions:

Hydrolyze

To chemically break down a compound into smaller molecules by reacting with water.

Cellulose

A complex carbohydrate that forms the primary structural component of plant cell walls and is indigestible to humans.

Lipids

Organic compounds that are fatty acids or their derivatives and are insoluble in water but soluble in organic solvents. They are an important component of living cells.

Day-neutral Plants

do not require a specific photoperiod to initiate flowering, allowing them to bloom regardless of night length.