Suppose that Congress allocates 1 billion to clean up after hurricanes in 2016. It also raises taxes by 1 billion to keep the deficit from growing. If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?
A) GDP increases by 900,000. B) GDP increases by 10 billion.
C) GDP increases by 1 billion. D) GDP does not change.
Question 2
Refer to Table 1-3. What is Santiago's marginal cost if he decides to stay open for an extra two hours instead of one hour?
A) 18 B) 36 C) 38 D) 102
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