Solved

The Government Reduces Taxes by $20 Million

Question 54

Multiple Choice

The government reduces taxes by $20 million.Suppose that there is no crowding-out effect, and that the marginal propensity to consume is 0.9.What is the total effect on aggregate demand?


A) $18 million
B) $22 million
C) $180 million
D) $200 million

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q49: The multiplier effect suggests that the increase

Q50: According to the RBA's policy guidelines, if

Q51: The money demand curve shifts to the

Q52: Any change in government spending has a

Q53: A rise in the inflation target by

Q55: In the long run, the interest rate

Q56: In the liquidity preference theory, money is

Q57: In order to fight recession, the RBA

Q58: The theory of Ricardian equivalence suggests that

Q59: The government-purchases multiplier is defined as:<br>A)1 -