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ECON 202 FINAL EXAM with Questions and Answers.
A $100 billion increase in government purchases has a greater effect on real GDP than a $100 billion 
reduction in taxes because - Some o the income consumers gain from the tax reductions will be 
saved rather than spent 
A decrease in taxes - Raises AD by raising disposable income, thereby decreasing consumption 
A decrease in wealth will - Shift the consumption function downward 
A possible downside of industrial policy is that 
A. The government cannot be trusted to identify emerging technolo...
- Exam (elaborations)
- • 18 pages •
A $100 billion increase in government purchases has a greater effect on real GDP than a $100 billion 
reduction in taxes because - Some o the income consumers gain from the tax reductions will be 
saved rather than spent 
A decrease in taxes - Raises AD by raising disposable income, thereby decreasing consumption 
A decrease in wealth will - Shift the consumption function downward 
A possible downside of industrial policy is that 
A. The government cannot be trusted to identify emerging technolo...