An increase in expected future taxes will cause:the IS curve to shift right in the current periodthe LM curve to shift down in the current periodO both the IS and the LM curves to shift right in the current periodthe LM curve to shift up in the current periodthe IS curve to shift left in the current period

IS curve depicts the combination of interest rate and output level which clears the goods market…

Answered: An increase in expected future taxes…

An increase in expected future taxes will cause: the IS curve to shift right in the current period the LM curve to shift down in the current period

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Suppose the marginal propensity to consume (MPC) is either 0.75, 0.96, or 0.62. a. For each…

A: GDP shows total market value that produced within a country in a specific time period .GDP is used…

Q: If the LM curve is vertical and government spending rises by G, in the IS-LM analysis, then…

A: LM curve is used to represent the liquidity of money.

Q: Calculate the value of marginal propensity to consume when MPS is 1

A: The relationship between MPS and MPC will help us to.calculate the value of MPC if MPS is given.…

Q: If the marginal propensity to consume is 0.9, every $10 billion increase in taxes will cause a…

A: Marginal propensity to consume is change in consumption with respect to change in income.

Q: An increase in the interest rate would shift the consumption function upward. True or False

A: The consumption function describes the relationship between overall consumption and gross domestic…

Q: If aggregate demand is increased by 4500 and MPC is 0.75, what is the increase in Y?

A: Aggregate demand (AD): - It is the total demand for goods and services in an economy at a particular…

Q: In the Keynesian model, the effect on equilibrium aggregate expenditure and output of an increase in…

A: The Keynesian model emphasizes the importance of the role of aggregate expenditure (AE) in…

Q: Use the Keynesian cross to predict the impact on equilibrium GDP of equal-sized increases in both…

A: The gross domestic product refers to the total amount of all the goods and services produced in an…

Q: Which of the following would likely cause an upward parallel shift in the AE curve and a rightward…

A: MPC is the slope of the Aggregate Expenditure curve (AE). So, an increase in the MPC will not make…

Q: Assume taxes are zero and an economy has a consumption function of C = 0.68 (Yd) + $237.99. What is…

A: The marginal propensity to consume (MPC) index measures the proportion of income that is spent on…

Q: A higher value of the fiscal multiplier will a. Effect the slope of the LM curve b. Make the IS…

A: Fiscal Policy has a multiplier effect on the economy-any change in government spending or taxes will…

Q: The table shows real GDP, Y, the components of planned expenditure, and aggregate planned…

A: Computing MPC; Marginal propensity to consume (MPC) is the change in consumption in response to a…

Q: If the marginal propensity to consume (MPC) is 0.90, a $100 increase in taxes imposed by the…

A: The marginal propensity to consume (MPC) is the proportion of income spent on consumption. The gross…

Q: A change in the price level will cause a shift in the expenditure schedule. True or False

A: Answer to the question is as follows :

Q: I already have A,B,C and i have posted the answers with this. Can i please just get help with D,E,F?…

A: IS-LM model is the macroeconomic model which shows the interaction between economic and money…

Q: Derive an IS curve that is highly interest rate elastic. Make sure to graph the Investment schedule…

Q: If the marginal propensity to consume (MPC) = 0.80 and for every $10 change in G, I decreases by $4.…

A: The components of aggregate demand are: Consumption, Government purchases, investment and net…

Q: If net exports increase by 100 and the mpc is 0.75, equilibrium aggregate output increases by

A: MPC is the marginal propensity to consume which is the proportion of change in income that is spent…

Q: Suppose an economy is initially in equilibrium at its potential output level. As a result of an…

A: Given: Horizontal distance=$140 billion MPC=0.25

Q: Assume taxes are zero and an economy has a consumption function of C = 0.59 (Yd) + $213.05. What is…

A: When there are no savings, the income reaches the break-even level. We are aware that savings plus…

Q: Suppose the Federal government raises taxes which would decrease consumption by $50 billion, that…

A: Change in equilibrium GDP=$50 billion Initial change in spending=50/5=10 50/10=5

Q: he marginal propensity to consume (mpc) is 0.8. In addition, government spending increases by $200…

A: The marginal propensity to consume is 0.8=> MPC =…

Q: A rise in interest rate.

Q: Suppose the marginal propensity to consume is 0.6. Use the Keynesian Cross model to predict the…

A: The marginal propensity to consumer (MPC) is a metric in economics that measures the change in the…

Q: If an increase in aggregate expenditures results in no increase in real GDP we can surmise that the:…

A: Real Gross Domestic Product (GDP) is a measure of the value of all goods and services produced…

Q: The Keynesian multiplier relationship Y = 1/ (1-c) is derived from two initial equations: Y = C + I…

A: The objective of the question is to understand the conditions under which the Keynesian multiplier…

Q: What is the effect of an increase in investment on an economy's AE curve and AD curve? Price level…

A: In the macroeconomic model of AD-AS, aggregate (AE) expenditure refers to the value of all final…

Q: Examine the impact of a decrease in taxes using IS-LM model on the interest rates, investment and…

A: IS equation Y = C + I + G + NX A decrease in taxes will increase the disposable income of…

Q: False : A recessionary gap can be caused by consumers who spend more than the

A: Recessive gap. Occurs when real GDP (more than full employment) falls below potential GDP, which…

Q: The fluctuations in the income level that result from changes in investment spending depend…

A: MPC is the marginal propensity to consume which is the ratio of percentage of change consumption…

Q: If taxes increases from $100 billion to $139 billion, and the MPC is 0.8, how much is the change in…

A: Aggregate demand is classified as the combination or merging of the demand of the services and the…

Q: If the marginal propensity to consume (MPC) is 0.8, the government purchases multiplier will be that…

A: GDP is the sum of consumption, investment, government spending and net exports in an open economy.…

Q: plain

A: Fiscal policy is through which a government tends to adjusts its tax rates and levels of for…

Q: In this graph, if firms are producing at level Y3, then inventories will, inducing firms to…

A: Actual expenditure is the amount spent actually while production while planned expenditure is the…

Q: Consider the graph at right showing an economy in recession. Aggregate demand is currently at AD.…

A: The concept of aggregate demand pertains to the collective desire for goods and services within an…

Q: An inflationary gap is the amount by which aggregate expenditures ____ the amount required to…

A: Inflationary gap refers to the situation when current level of output (current GDP) exceeds…

Q: The introduction of taxes and imports into the Aggregate Expenditure model leads the AE line to…

A: Aggregate Expenditure is the value of goods and services in the economy. AE=C+I+G+NX which gives…

Q: Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.

A: SRAS is the short run aggregate supply curve which depicts the relationship between the price(P) and…

Q: Consider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were…

A: Equilibrium in the keynesian model is achieved at Y= aggregate expenditure.

Q: The graph below characterizes a simple economy with only two components of aggregate expenditures:…

Q: Assume taxes are zero and an economy has a consumption function of C = 0.64 (Yd) + $250.19. What is…

A: Consumption function has two components, autonomous consumption and induced consumption that depends…

Q: if the multplier in an economy is 2, a $10 billion increase in net exports will

A: The Multiplier Effect : An initial fiscal injection in the economy gives us a comparatively higher…

Question

An increase in expected future taxes will cause:
the IS curve to shift right in the current period
the LM curve to shift down in the current period
O both the IS and the LM curves to shift right in the current period
the LM curve to shift up in the current period
the IS curve to shift left in the current period

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

You are studying an economy with an income tax rate, t1, of 32%and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the topolicythat it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.”[Hint: Let I change and compare the I multipliers in each of these economies.] \
Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve? a) a reduction in government purchases b) an decrease in the MPC c) an increase in the price level O d) an increase in the business confidence of firms e) a decrease in the price level
According to the Keynesian-cross analysis, if the marginal propensity to consume is 0.75 and government expenditures increased by 100 while taxes are cut by 100, equilibrium income will rise by: Group of answer choices 0. 100. 200. 700.
4. The investment demand curve The following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical economy. For example, $100 billion worth of investment projects have an expected rate of profit that is greater than or equal to 8%. Put another way, at an interest rate of 8%, the amount of investment demanded equals $100 billion. Expected Rate of Profit Cumulative Investment at this Rate of Profit or Higher (Percent) (Billions of Dollars) 75 INTEREST RATE (Percent) 16 15 14 13 12 + 11 10 2 0 Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (1) on the graph. Line segments will automatically connect the points. H+++ 10 0 8 6 4 100 25 125 150 50 75 100 126 150 175 200 REAL INVESTMENT (Billions of dollars) Investment Function Determine how each of the following events will shift the investment demand (1) curve. ?
Suppose an economy is initially in equilibrium at its potential output level. As a result of an unexpected crisis in the financial markets, the AD curve suddenly shift to the left by a horizontal distance equal to $140 billion. Suppose the government has decided to restore the economy to its initial level of output by simultaneously increasing its spending and increasing taxes (so that it does not run into a deficit). Assuming the marginal propensity to consume in this economy is 0.25, by how much must the government increase its spending (and taxes) to achieve its goal? (Calculate your answer in billions of CAD, round it to one decimal places, and write it without units. E.g., write 1.0 for $1 billion.
Explain in detail what effect a reduction in government spending will have on: (1) the LM curve; and (2) the IS curve.
True or False: An increase in the price level will shift the LM curve to the right.
Given the following information, S = -200 + 3Y I = 100 Calculate the national income equilibrium by using the Leakage-Injection Calculate the value of saving Draw the aggregate expenditure graph
Which of the following will increase consumption spending? Group of answer choices a housing market crash an increase in the personal income tax rate a boom in the stock market an increase in the nominal interest rate
At an intial point on the aggregate demand curve, the price level is 100, the real GDP is $18 trillion. After the price level rises to 110, however there is an upward movement along the aggregate demand curve, and real GDP declines to $14 trillion. If total planned spending declines by $200 billion in response to the increase in the price level, what is the MPC in this economy?
Please explain how a decline in income tax rate will affect the economy in the short run using IS-LM, AS-AD and Md-Ms curves.
Assume the following model of the expenditure sector: S=C+I+G+Nx TR=100 C=420+(4/5)YD I=160 G=180 Nx=-40 YD=Y+TR-TA TA=(1/6)Y Assume you increase both government purchases (G) and taxes (TA) by the same lump sum of deltaG=deltaTA=+300. Would this be sufficent to reach the full employment level of output at Y*=2700? Why or why not?