You Are Hired by the Bureau of Economic Analogies (BEA)

question 286

Multiple Choice

You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $500 billion. The best estimate he has for the MPC is 0.7. Which of the following policies should you recommend?

• A) Decrease government spending by $75 billion.
• B) Reduce taxes by $214.3 billion.
• C) Reduce taxes by $314.3 billion and to decrease government spending by $500 billion.
• D) Reduce the budget deficit by $300 billion.

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Definitions:

Physical Addiction

A physiological dependency on a substance, characterized by the emergence of withdrawal symptoms when the substance is not consumed.

Intoxication

The state of being under the influence of alcohol or drugs, impairing mental and physical functions.

Depressant

A substance that slows down the activity of the central nervous system, potentially reducing arousal or stimulation.

Barbiturate

A class of drugs that act as central nervous system depressants, used primarily for their sedative, hypnotic, and anti-seizure properties.