ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423623
Author: William A. McEachern
Publisher: Cengage Learning
Question
Book Icon
Chapter 11, Problem 1.1PA

Sub-part

A

To determine

The impact of decrease in the government purchase on GDP.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-part

A

Expert Solution
Check Mark

Explanation of Solution

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

A decrease in government purchases Decreases in government purchases will reduce the aggregate demand of the economy, thus controlling the inflation rate, but will have the reverse effect on GDP.

Sub-part

B

To determine

The impact of an increase in the net taxes on GDP.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-part

B

Expert Solution
Check Mark

Explanation of Solution

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

An increase in net taxes Increases in net taxes will reduce the disposable income of the people. This will reduce the aggregate demand as such reduce consumer spending, and thus have a negative impact on GDP.

Sub-part

C

To determine

The impact of reduction in transfer payments on GDP.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-part

C

Expert Solution
Check Mark

Explanation of Solution

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

A reduction in transfer payments Reduction in transfer payment will reduce consumer spending and thus will have a negative impact on GDP.

Sub-part

D

To determine

The impact of decrease in the marginal propensity to consume on GDP.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-part

D

Expert Solution
Check Mark

Explanation of Solution

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

A decrease in the marginal propensity to consumer A decrease in marginal propensity to consume implies an increase in the rate of savings and decrease in the rate of consumer spending. This implies the rate of consumption will reduce. This will decrease GDP.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Key shortcomings of the Human Capital approach to measuring the monetary value of benefits of new treatments are that it Will generate lower benefits for male lives on average Will generate higher benefits for female lives on average Will tend to OVERVALUE improvements in quality of life Will tend to UNDERVALUE improved survival for people out of labour force
One of the key concepts in economics that underpins the necessity of making tough choices and confronting difficult tradeoffs through some form of collective decision-making is called Production Consumption Exchange Equity Scarcity
Allocative efficiency WITHIN the health care sector refers to What mix of nonmedical and medical goods and services should be produced in the macro-economy What mix of medical goods and services should be produced in the health economy What specific health care resources should be used to produce the chosen medical goods and services Who should receive the medical goods and services that are produced
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
MACROECONOMICS
Economics
ISBN:9781337794985
Author:Baumol
Publisher:CENGAGE L
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning