Tax cuts on business income increase aggregate demand by increasing
A) wage rates. B) government spending.
C) consumption spending. D) business investment spending.
Question 2
Refer to Figure 23-3. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2, and this amount is 200 billion. If the MPC is 0.
8, then what is the distance between N and L or by how much did government spending change?
A) 16 billion B) 40 billion C) 200 billion D) 1,000 billion
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