When taxes increase, consumption _____, business investment ______, and real GDP output ______. A. decreases shifting aggregate demand left; decreases shifting aggregate supply left; decreases reducing economic growth, and lowering the standard of living. B. increases shifting aggregate demand right; increases shifting aggregate supply right; increases resulting in sustained economic growth, and a higher standard of living. C. decreases shifting aggregate demand left; decreases shifting aggregate supply left; increases resulting in sustained economic growth, equality and prosperity for all. D. None of the answers are correct.

When taxes increase, consumption _, business investment , and real GDP output ____. A. decreases shifting aggregate demand left; decreases shifting aggregate supply left; decreases reducing economic growth, and lowering the standard of living. B. increases shifting aggregate demand right; increases shifting aggregate supply right; increases resulting in sustained economic growth, and a higher standard of living. C. decreases shifting aggregate demand left; decreases shifting aggregate supply left; increases resulting in sustained economic growth, equality and prosperity for all. D. None of the answers are correct.

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

If investment increases by $50 billion, by how much will aggregate demand change? Aggregate demand will _______. A. increase by less than $50 billion because there will be fewer goods and services produced for consumption expenditure B. increase by more than $50 billion because the increase in aggregate income induces an increase in consumption expenditure C. probably decrease by $50 billion, but it depends on the change in aggregate supply D. increase by exactly $50 billion because investment is a component of aggregate demand
Suppose real GDP exceeds potential real GDP. If the government decreases its expenditures on goods and services, then real GDP _______and the price level ________ (a) Decreases; rises (b) Increases; falls (c) Decreases; falls (d) Increases, rises
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
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
What are the important mechanisms that reverse the effects of a recession in a modern economy? (Check all that apply.) A. Labor supply increases due to an increase in real wages. B. The multipliers on wages and employment return to normal. C. Labor demand increases due to expansionary government policies. D. Labor demand increases due to market forces. What market forces might cause the labor demand curve to shift back to the right? (Check all that apply.) A. Technological advances encourage firms to expand their activities. B. The banking system recuperates and businesses are again able to use credit to finance their activities. C. Excess inventory has been sold off. D. Wage rigidity decreases.
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.
In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true? A. When consumption increases by RM5, investment increases by a maximum of RM1. B. When consumption increases by RM5, savings increase by a maximum of RM1. C. When investment increases by RM1, income increases by a maximum of RM5. D. When investment increases by RM1, consumption increases by a maximum of RM5.
Please explain all and explain the right and wrong answers also Q1. If consumption was 60 percent of GDP, investment was 15 percent of GDP, and government expenditure was 15 percent, then we see that: a)There must be no exports and imports. b)Exports must be equal to imports. c)Exports must be less than imports. d)Exports must be more than imports. Q2. Nominal GDP grew by 10% and real GDP grew by 8%, then we see that a)Inflation measured by consumer price index was negative. b)Inflation measured by GDP deflator was positive. c)Inflation measured by GDP deflator was negative. d) Inflation measured by consumer price index was positive. Q3. Country "X" government borrows heavily from foreign banks and pays large amount of interest on her debt. Which is an appropriate description of Country X’s national economic accounting? a)GDP is lower than GNI. b)GDP is higher than GNI c) Net factor income from abroad is positive. d) Country X is running a trade deficit. Q4. A country's…
In a two sector economy, aggregate demand is a function of _________ and __________
Even during a financial recession, consumers tend to increase spending in _______
Question 4. Suppose a government moves to reduce a budget deficit. a. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the effect of reducing a government's budget deficit by reducing government purchases. Be sure to label: i. the axes ii. the curves iii. the initial equilibrium values iv. the direction curves shift v. the terminal equilibrium values. b. State and explain in words what happens to the following variables: i. the real interest rate ii. national saving iii. investment iv. consumption v. output.