Figure 8-1

-Based on the scatter diagram in Figure 8-1, approximately how much will consumption increase after a permanent tax cut of $400 billion?

Question

Figure 8-1
​ 
-Based on the scatter diagram in Figure 8-1, approximately how much will consumption increase after a permanent tax cut of $400 billion?

Quizplus · Accepted Answer

Based on the scatter diagram, we can see that for every $100 billion increase in government spending, there is an approximately $250 billion increase in consumption. Therefore, a permanent tax cut of $400 billion may result in an increase in consumption of approximately 2.5 times that amount, or $250 billion. Therefore, the best choice is C, which is $250 billion.

Figure 8-1 ​

Figure 8-1