Suppose That in an Economy with a MPC of

question 96

Multiple Choice

Suppose that in an economy with a MPC of .5 the government wanted to shift the aggregate demand curve rightward by $80 billion at each price level to expand real GDP.It could:

• A)reduce taxes by $160 billion.
• B)increase government spending by $80 billion.
• C)reduce taxes by $40 billion.
• D)increase government spending by $40 billion.

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Definitions:

Information

Data, facts, or knowledge conveyed or represented in a format that is understandable and can be used to make decisions.

Car Salesman

A person who sells new or used cars at a dealership and is often involved in negotiating prices and financing terms with buyers.

Dealer

An individual or firm involved in the business of buying and selling securities for their own account or for others.

Agency Costs

Costs arising from the conflict of interest between a principal (such as a shareholder) and an agent (such as a company manager), including monitoring and contracting costs.