If the Government Increases Expenditure by $40 Billion and Increases

question 100

Essay

If the government increases expenditure by $40 billion and increases tax revenue by $40 billion,what is the impact on aggregate demand? Explain your answer.

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Definitions:

Demand Determined

A situation where the quantity of a good or service bought is strictly influenced by consumer demand.

MRP

Marginal Revenue Product, which is the additional revenue generated from employing one more unit of a resource.

Productivity

A measure of the efficiency of production, often expressed as the ratio of output to input within a specific period.

Marginal Revenue Product

The additional revenue a firm generates from employing one more unit of input, such as labor or capital.