Which of the following statements is incorrect?
A)Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
B)Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4.
C)If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion.
D)A government surplus is anti-inflationary; a government deficit is expansionary.

Question

Quizplus · Accepted Answer

A tax reduction of $10 billion will increase the equilibrium GDP by $10 billion when the MPS is 0.4, not $25 billion.

Which of the Following Statements Is Incorrect