Suppose the government increases unemployment benefits, which are ...

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Suppose the government increases unemployment benefits, which are paid for with higher taxes on earnings. If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes, _____.
 a. GDP will first increase and then fall.
  b. There will be no change in real GDP.
  c. Real GDP will increase substantially.
  d. Real GDP will fall substantially.
 e. GDP will first fall and then increase.

Question 2

If the consumer price index (CPI) is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately _____.
 a. 4.5 percent
  b. 8.6 percent
  c. 9.4 percent
  d. 15 percent
 e. 175 percent

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Answer to Question 1

b

Answer to Question 2

c