Suppose That Real GDP Is Initially $100 Trillion and the Government

question 263

Multiple Choice

Suppose that real GDP is initially $100 trillion and the government attempts to increase real GDP to $101 trillion. The marginal propensity to consume is 0.75, and every $1.00 increase in real government spending crowds out $0.50 in real planned investment expenditures. How much increase in real government spending could lead to the desired level of real GDP?

• A) $200 billion
• B) $250 billion
• C) $500 billion
• D) $1 trillion

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Definitions:

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The comprehensive framework of rules and institutions established by a society to regulate conduct, resolve disputes, and enforce laws.

Law of Equity

A branch of law that deals with fairness, rectifying wrongs, and providing remedies that are not available in common law.

Law and Morality

Refers to the relationship and distinction between the legal rules governing a society and the ethical principles that underlie them.

Stare Decisis

The legal principle of determining points in litigation according to precedent, maintaining consistency and predictability in the law.