Which of the Following Fiscal Policy Changes Would Be the Most

question 31

Multiple Choice

Which of the following fiscal policy changes would be the most contractionary?

• A) A $40 billion increase in taxes
• B) A $10 billion increase in taxes and a $30 billion cut in government spending
• C) A $20 billion increase in taxes and a $20 billion cut in government spending
• D) A $30 billion increase in taxes and a $10 billion cut in government spending

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Definitions:

Factor A

Represents a specific variable or condition in an experiment or study that is manipulated to determine its effect on an outcome.

Two-way ANOVA

A statistical analysis technique used to analyze the effects of two independent variables on a dependent variable and their interaction.

Interaction Effect

A statistical concept in which the effect of two or more variables is not simply additive, indicating that these variables interact in predicting a particular outcome.

Main Effect

The overall impact of an independent variable on a dependent variable in an analysis, ignoring the effects of other independent variables.