An Aide to a U

question 109

Multiple Choice

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

• A)The actual MPC was larger than the MPC the aide used to compute the multiplier.
• B)The aide thought the tax cut would be permanent,but the actual tax cut was temporary.
• C)The increase in income shifted money demand less than the aide had anticipated.
• D)The increase in income resulted in investment rising more than the aide had anticipated.

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Definitions:

Dentist Appointment

A scheduled visit to a dental care professional for the examination, diagnosis, prevention, or treatment of oral health issues.

Cognitive Misers

A term referring to the tendency of humans to avoid expending effort and resources when thinking and to prefer simple and less effortful ways of processing information.

Automatic Modes

Processes in the brain that occur without conscious thought, often as habitual responses or reactions to certain stimuli.

Conserve Effort

The tendency to reduce the amount of mental or physical energy expended on tasks, often by relying on heuristics or shortcuts.