Suppose the President Is Successful in Passing a $10 Billion

question 178

Multiple Choice

Suppose the president is successful in passing a $10 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.8.What happens to equilibrium GDP?

• A)There is a $50 billion increase in equilibrium GDP.
• B)There is a $50 billion decrease in equilibrium GDP.
• C)There is a $40 billion increase in equilibrium GDP.
• D)There is a $40 billion decrease in equilibrium GDP.

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Definitions:

Merger Negotiations

Discussions and strategic planning between two or more companies with the goal of combining their operations, typically to achieve synergies.

Activist Investors

Investors who use an equity stake in a corporation to put pressure on its management to enact changes they believe will increase shareholder value.

Corporate Structure

The organization of different departments or business units within a company, defining roles and responsibilities.

Hedge Fund Investors

Individuals or institutions that invest in hedge funds, which are pooled investment funds that employ different strategies to earn active return, or alpha, for their investors.