Sub-part
A
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
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
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
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
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
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
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
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.
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