You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by 300 billion TL. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend? a) Increase government purchases by 75 billion TL. b) Reduce taxes by 75 billion TL. c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL. d) Reduce the budget deficit by 300 billion TL
You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by 300 billion TL. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend? a) Increase government purchases by 75 billion TL. b) Reduce taxes by 75 billion TL. c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL. d) Reduce the budget deficit by 300 billion TL
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 2TY
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You are hired by the Council of Economic Advisors (CEA) as an economic consultant.
The chairperson of the CEA tells you that she believes the current
too high. The unemployment rate can be reduced if
to know what policy to pursue to increase aggregate output by 300 billion TL. The best
estimate she has for the MPC is 0.8. Which of the following policies should you
recommend?
a) Increase government purchases by 75 billion TL.
b) Reduce taxes by 75 billion TL.
c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL.
d) Reduce the budget deficit by 300 billion TL
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