If $500,000 in New Taxes Is Raised and Spent on Building

question 149

Multiple Choice

If $500,000 in new taxes is raised and spent on building a new school and $300,000 in private spending would have been spent anyway,how much is added to short-run aggregate demand?

• A) $100,000
• B) $200,000
• C) $300,000
• D) $500,000

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Definitions:

Depreciates

The loss of value of an asset over time due to factors such as wear and tear, age, or technological advancements.

Russian Ruble

The national currency of Russia, utilized as the medium of exchange within the country.

Appreciate

To increase in value or price over a period of time.

Freely Flexible Exchange Rates

A currency system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct government intervention.