Refer to the information provided in Table 24.8 below to answer the question(s) that follow.
Table 24.8
All Figures in Billions of Dollars

-Refer to Table 24.8. If taxes are reduced by $50 billion and government spending is reduced by $50 billion, the new equilibrium level of income

Question

Refer to the information provided in Table 24.8 below to answer the question(s) that follow.
Table 24.8
All Figures in Billions of Dollars
 
-Refer to Table 24.8. If taxes are reduced by $50 billion and government spending is reduced by $50 billion, the new equilibrium level of income

Quizplus · Accepted Answer

The correct answer is A because the new equilibrium level of income is $3,550 billion. This is because the reduction in taxes will increase disposable income and thus increase consumption, while the reduction in government spending will decrease aggregate demand. The net effect of these two changes will be an increase in the equilibrium level of income.

Refer to the Information Provided in Table 24