Assume That Taxes Depend on Income

question 243

Multiple Choice

Assume that taxes depend on income. The MPC is 0.75 and t is 0.2. If government spending increases by $10 billion, the equilibrium level of output will increase by

• A) $16.7 billion.
• B) $25 billion.
• C) $50 billion.
• D) $100 billion.

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Definitions:

Edmund Randolph

An American attorney and politician who served as the first U.S. Attorney General and the seventh Governor of Virginia.

James Wilson

One of the Founding Fathers of the United States and a signatory of the United States Declaration of Independence, as well as a key contributor to the drafting of the U.S. Constitution.

Alexander Hamilton

A Founding Father of the United States, known for being an influential interpreter and promoter of the U.S. Constitution, as well as the founder of the nation's financial system.

Articles of Confederation

The first constitution of the United States, ratified in 1781, which established a national government with limited powers and significant authority granted to the states.