A $100 Billion Increase in Government Purchases Has a Greater

question 117

Multiple Choice

A $100 billion increase in government purchases has a greater effect on real GDP than a $100 billion reduction in net taxes because

• A)some of the income consumers gain from the tax reduction will be saved rather than spent
• B)some of the income consumers gain from the tax reduction will be spent on services rather than products
• C)some of the income consumers gain from the tax reduction will be spent on goods made in foreign countries
• D)the consumers' MPC is higher than the government's
• E)the consumers' MPC is 1

Understand the effects of macroeconomic shocks, such as oil price changes, on the economy.

Know the roles and appointment process of the Federal Reserve System’s Board of Governors.

Grasp the stages of the industry life cycle and their significance for investment and economic analysis.

Understand the relationship between the money supply, interest rates, inflation, and economic activity.

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