Which piece of information would be least useful in trying t

Which piece of information would be least useful in trying to predict the effect of a $700M increase in government spending on equilibrium GDP?

A. Marginal propensity to save

B. The slope of the aggregate supply curve

C. Whether taxes are raised to pay for the spending increase

D. The current level of structural unemployment

E. Whether the bonds used to finance the spending were sold to households or to the Fed

I chose D because I think it\'s irrelevant, but I need someone to verify if I got it right or not. And also explain what option D means. Thanks!

Solution

D. The current level of structural unemployment.

Explanation:- Structural unemployment is associated with the structural changes in the economy. Umemployed workers lack skill and traning, required by the developing industries. For example, due to computerisation, workers who do not possess enough knowledge of computers, will be unemployed, untill they do some computer course or training. The current level of structural unemployment would be very least useful in trying to predict the effect of a $700M increase in government spending on equilibrium GDP because increase in government spending (expenditure) is component of aggregate demand whereas level of structural unemployment is the sole determinant of level of the aggregate supply as per Keynesian model.