Assume That the Marginal Propensity to Consume Is 0

question 260

Multiple Choice

Assume that the marginal propensity to consume is 0.8 and potential output is $800 billion. If real GDP is $850 billion, to bring the economy to potential output the government should:

• A)decrease spending by $50 billion.
• B)increase spending by $50 billion.
• C)decrease transfers by $50 billion.
• D)decrease spending by $10 billion.

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Definitions:

Lazy

A reluctance to work or make an effort, often characterized by a lack of motivation or interest in being productive.

Prevalent Stereotypes

Commonly held oversimplified images or ideas of particular types of people or things.

Religious Affiliation

The formal association or identification of an individual with a particular religious group or tradition.

Intelligence

The ability to learn from experience, adapt to new situations, understand and handle abstract concepts, and use knowledge to manipulate one's environment.