Suppose That Congress Allocates $1 Billion to Clean Up After

question 99

Multiple Choice

Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016.It also raises taxes by $1 billion to keep the deficit from growing.If the marginal propensity to consume is 0.9,what is the effect on equilibrium GDP?

• A)GDP does not change.
• B)GDP increases by $10 billion.
• C)GDP increases by $900,000.
• D)GDP increases by $1 billion.

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Definitions:

Volume Constancy

The perceptual phenomenon where the perceived volume of an object remains constant despite changes in distance or the angle of viewing.

Concrete Operational

A stage in Piaget's theory of cognitive development, where children aged 7 to 11 years can think logically about concrete events.

Shape Changes

Modifications in form or structure, often referring to physical transformations of objects or organisms.

Cognitive Development

The process by which individuals learn, understand, and become capable of using intellectual capacities such as reasoning, problem solving, and memory.