A drop in the price level will have what effect in the aggregate demand model and the income-expenditure model? A. decreases aggregate demand and planned expenditures. B. increases aggregate demand, but decreases planned expenditures. C. decreases aggregate quantity demanded, but increases planned expenditures. D. increases aggregate quantity demanded and planned expenditures.

A drop in the price level will have what effect in the aggregate demand model and the income-expenditure model? A. decreases aggregate demand and planned expenditures. B. increases aggregate demand, but decreases planned expenditures. C. decreases aggregate quantity demanded, but increases planned expenditures. D. increases aggregate quantity demanded and planned expenditures.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

See similar textbooks

Similar questions

One way that the government can increase aggregate demand is by: A. reducing income taxes. B. increasing the interest rates. C. reducing government spending. D. increasing business taxes.
If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur? A. Aggregate demand will be unchanged. B. Aggregate demand will increase. C. Interest rates will decrease. D. The money supply will decrease.
During recessions, taxes tend to a. rise and thereby increase aggregate demand. b. fall and thereby decrease aggregate demand. c. fall and thereby increase aggregate demand. d. rise and thereby decrease aggregate demand.
Assume the marginal propensity to consume is 0.8. To offset a fall in income of 1,000 the government should a. raise taxes by $250. b. increase government spending and taxes by 1,000. c. increase taxes by $200. d. cut taxes by $200.
d. Now G assumes its original value of G = 800. Congress decreases the tax rate from (1/2) to (1/4). i) Use a model to sketch the effect of the decrease in the tax rate when the price level is held constant. ii) What is the new marginal propensity to consume? iii) Calculate the new equilibrium level of income.
If planned expenditures are below actual production, what will happen to income? Explain the process by which this happens.
Which of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession? a. A cut in the marginal tax rate increases the incentives to find a job and work longer hours. b. Consumers will save a portion of a tax cut. c. The government may use the increase in expenditures on projects with little value, particularly, if it wishes to respond quickly. d. There is no evidence that tax cuts have been followed by increases in economic growth.
Which of the following is an example of an expenditure-increasing policy? a. a decrease in import quotas b. an increase in the money supply c. an increase in import tariffs d. higher income taxes
Which of the following statements are correct? The introduction of government spending increases the size of the multiplier. The introduction of taxes increases the size of the multiplier. The introduction of taxes reduces the slope of the consumption function. Select one: A. A B. None of the statements is correct. C. C D. B
What effect does an increase in government spending have on the aggregate demand curve in an economy? A. The aggregate demand curve shifts to the left. B. The aggregate demand curve becomes steeper. C. The aggregate demand curve shifts to the right. D. The aggregate demand curve becomes flatter.
Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output. an increase; an increase a decrease; no change a decrease; a decrease None of the listed options is correct. no change; a decrease
The relationship between changes in spending and Real GDP without price increase is: a. Economic Growth b. Demand Pull c. Multiplier Effect d. Fiscal Change