According to the macroeconometric model developed by Data Resources Incorporated, if taxes are increased by $100 billion, but the money supply is held constant, then GDP will fall by about:
A) zero.
B) $25 billion.
C) $75 billion.
D) $100 billion.

Question

Quizplus · Accepted Answer

According to the macroeconometric model developed by Data Resources Incorporated, if taxes are increased by $100 billion, but the money supply is held constant, then GDP will fall by about $25 billion. This is because an increase in taxes reduces disposable income, which leads to a decrease in consumption and investment spending.

According to the Macroeconometric Model Developed by Data Resources Incorporated