Refer to the information provided in Table 9.8 below to answer the questions that follow.
Table 9.8
All Figures in Billions of Dollars

-Refer to Table 9.8. 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 9.8 below to answer the questions that follow.
Table 9.8
All Figures in Billions of Dollars
 
-Refer to Table 9.8. 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, which will lead to an increase in consumption and investment. The reduction in government spending will decrease the government's demand for goods and services, which will lead to a decrease in output. The net effect of these two changes will be an increase in the equilibrium level of income.

Refer to the Information Provided in Table 9