If the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by
A. increasing government purchases by $25 billion.
B. decreasing taxes by $25 billion.
C. increasing government purchases by $80 billion.
D. decreasing taxes by $100 billion.
Answer: B
Economics
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A) Adam Smith. B) J. E. Meade. C) Ronald Coase. D) A. C. Pigou.
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If the tax function is T = t0 + t1Y where t1 equals 1/3, and if the marginal propensity to consume out of disposable income is 3/4, then the change in GDP per unit change in t0 (?Y/?t0) will be
a. ? 1. b. + 1. c. ? 1.5. d. ? 2. e. + 1.5.
Economics