Assume That There Is No Accelerator Affect

question 44

Multiple Choice

Assume that there is no accelerator affect.The MPC = 3/4.The government increases both expenditures and taxes by $600.The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone.The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand.How much does aggregate demand shift by?

• A)$1480
• B)$480
• C)$160
• D)None of the above is correct.

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Definitions:

Federal Level

Pertaining to the national government of a country, as opposed to state, local, or municipal levels.

Workers' Compensation

Insurance that provides wage replacement and medical benefits to employees injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue their employer for negligence.

Independent Contractors

Individuals or entities that perform work for another entity under terms specified in a contract, with a significant degree of independence in the way they operate, not considered employees.

Employees

Individuals who work for another person or an organization in return for financial or other compensation.