Suppose the President Is Successful in Passing a $5 Billion

question 57

Multiple Choice

Suppose the president is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

• A)There is a $20 billion increase in equilibrium GDP.
• B)There is a $20 billion decrease in equilibrium GDP.
• C)There is a $15 billion increase in equilibrium GDP.
• D)There is a $15 billion decrease in equilibrium GDP.

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Definitions:

Walking Purchase

An infamous 1737 purchase of Indian land in which Pennsylvanian colonists tricked the Lenni Lanape Indians. The Lanape agreed to cede land equivalent to the distance a man could walk in thirty-six hours, but the colonists marked out an area using a team of runners.

British Imperial System

A system of colonial rule and economic dominance exercised by Britain over its overseas territories from the 16th to the 20th century.

British Officials

Representatives or administrators from Britain who hold positions of authority in governmental or institutional capacities, often overseas in territories that were part of the British Empire.

Indian Lands

Territories historically occupied or used by Indigenous peoples, often subject to disputes and controversies over ownership and rights.