You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $400 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?
A. reduce the budget deficit by $400 billion
B. reduce taxes by $100 billion and increase government purchases by $50 billion
C. increase government purchases by $100 billion
D. reduce taxes by $100 billion
Answer: D
Economics
You might also like to view...
Important factors that change the demand for dollars and hence shift the demand curve for dollars include which of the following?
I. interest rates around the world II. the current exchange rate III. the expected future exchange rate A) I and II B) I and III C) II D) I, II, and III
Economics
According to Rosenberg (2004), the U.S. economy between the Civil War and World War II was relatively poor in which of its productive resources?
(a) Land (b) Labor (c) Capital (d) Entrepreneurial talent
Economics