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

---

Definitions:

Decisions

The act or process of making choices or selecting an option from available alternatives.

Conscientious

A personality trait characterized by being diligent, careful, and meticulous in one’s work or duties.

Evidence

Information or facts that are used to support the validity of an assertion or conclusion.

Alternative Solutions

Different strategies or approaches that can be used to solve a problem or achieve a goal.