Assume that the current level of GDP is $250 billion compared to a full-employme

ID: 1199036 • Letter: A

Question

Assume that the current level of GDP is $250 billion compared to a full-employment level of $200 billion. The MPC is 0.80.

1. What is likely to be the main economic problem facing the above economy?

2. If Government spending decreases by $100, GDP will

a) increase by $500 b) fall by $500 c) fall by $400

d) increase by $900 e) fall by $900

3. If taxes increase by $100, GDP will

a) increase by $400 b) decrease by $400 c) rise by $500

d) fall by $600 e) not change

Assume that the current level of GDP is $250 billion compared to a full-employme

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