If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

a. government spending by $250 billion.
b. taxes by $100 billion.
c. taxes by $1,000 billion.
d. government spending by $1,000 billion.

a

Economics

You might also like to view...

The essence of a prisoner's dilemma setting is that if both person A and person B do what is best for each of them,

A) they end up in a position that is "the best" for each of them. B) they end up in a position that is "the worst" for each of them. C) one ends up in a position that is "the best" for him and the other ends in a position that is "the worst" for him. D) they end up in a position from which each would prefer to move away. E) none of the above

Economics

Other things equal, the prospect of imitation by others:

A. decreases the expected rate of return on R&D expenditures. B. increases the expected rate of return on R&D expenditures. C. increases the interest-rate cost of funds used to finance R&D expenditures. D. decreases the interest-rate cost of funds used to finance R&D expenditures.

Economics