Question : 54) If the tax multiplier -5.25, then the government purchases : 1381425

54) If the tax multiplier is -5.25, then the government purchases multiplier

A) is 6.25.

B) is 4.75.

C) is 0.75.

D) cannot be determined because the MPS is not given.

55) If government spending is increased by $500, taxes are reduced by $200, and the MPS is 0.2, equilibrium output will change by

A) $1,500.

B) $1,700.

C) $3,300.

D) $3,500.

56) If government purchases are increased by $30, taxes are reduced by $30, and the MPC is 0.75, equilibrium output will change by

A) $900.

B) $210.

C) $30.

D) zero.

57) If government spending is increased by $1,000 and taxes are increased by $1,000, the equilibrium level of income will

A) decrease by $1,000.

B) not change.

C) increase by $1,000.

D) increase by $2,000.

58) If government purchases are decreased by $375 and taxes are decreased by $375, the equilibrium level of income will

A) decrease by $375.

B) increase by $375.

C) not change.

D) decrease by $750.

59) Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ________; and if taxes increase by $200, equilibrium output ________.

A) increases by $1,000; decreases by $800

B) increases by $800; decreases by $600

C) increases by $1,000; decreases by $1,000

D) increases by $1,600; decreases by $1,200

60) Assume that the MPC is 0.8. If government purchases increase by $500, equilibrium output ________; and if taxes increase by $500, equilibrium output ________.

A) increases by $2,500; decreases by $2,000

B) increases by $4,000; decreases by $3,000

C) increases by $2,000; decreases by $1,000

D) increases by $1,600; decreases by $1,200

61) 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 $500 billion. The best estimate she has for the MPC is 0.5. Which of the following policies should you recommend?

A) increase government purchases by $200 billion

B) increase government purchases by $250 billion

C) cut taxes by $200 billion

D) cut taxes by $200 billion and to increase government purchases by $200 billion

62) You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The Chairperson of the BEA tells you that he believes the current unemployment rate is too low. The unemployment rate can be increased if aggregate output decreases. He wants to know what policy to pursue to decrease aggregate output by $50 billion. The best estimate he has for the MPC is 0.9. Which of the following policies should you recommend?

A) decrease government spending by $5 billion

B) decrease government spending by $50 billion

C) increase taxes by $5 billion

D) cut taxes by $10 billion and to increase government spending by $5 billion

63) 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) increase government purchases by $100 billion

B) reduce taxes by $100 billion

C) reduce taxes by $100 billion and increase government purchases by $50 billion

D) reduce the budget deficit by $400 billion