As a member of the Presiden\'ts council of Economic Advisors, you estimate that

Question

As a member of the Presiden'ts council of Economic Advisors, you estimate that an increase in the federal deficit of a given amount will increase equilibrium income by twice that amount. If the goal of the administration is to increase equilibrium income by $1000, you would recommend: and why?

a increases in both government spending and taxes of $500
b a reduction of government spending of $500 with no change in taxes
c a reduction of taxes of $1000 with no change in government spending
d an increase in government spending of $250 and a reduction of taxes of $250
e a tax increase of $500 with no change ingovernment spending

Explanation / Answer

ANSWER = d. an increase in government spending of $250 and a reduction of taxes of $250 we need to put govt in a deficit of net 500$ to give a benefit of 1000$. so we need to increase the govt spending by 500$.. no other option increases govt spending by net 500$ PLEASE RATE

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