Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 27, Problem 2.6P
Sub part (a):
To determine
The effects of the discount rate on aggregative
Sub part (b):
To determine
The effects of increasing price level on aggregative demand.
Sub part (c):
To determine
The effects of income tax on aggregative demand.
Sub part (d):
To determine
The effects of investment spending on aggregative demand.
Sub part (e):
To determine
The effects of inflation rates on aggregative demand.
Sub part (f):
To determine
The effects of government purchases on the aggregative demand.
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Students have asked these similar questions
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.
Draw a graph, using the Aggregate Demand – Aggregate Supply curves, the result of a tax increase and cuts in federal expenditures during a period of inflation. Label all axes and curves and show which curve shifts and indicate the new equilibrium. As well as explain your graph in words.
Examine the following policies and determine which would decrease the level of aggregate demand.
Group of answer choices
A. Decreasing in government spending and decreasing taxes
B. Increasing investment and increasing government spending
C. Decreasing in government spending and increasing in taxes
D. Increasing consumption and decreasing taxes
Chapter 27 Solutions
Principles of Economics (12th Edition)
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Similar questions
- Which of the following is likely to result from a rapid rise in aggregate demand? Select one: a. Static living standards b. Increased unemployment c. Rising prices d. Surplus on the balance of paymentsarrow_forwardIf the government announces a decrease in spending with an increase in taxes, which of the following would most likely occur? a. a leftward shift of the aggregate demand curve b. a rightward shift of the aggregate demand curve c. an upward movement along the aggregate demand curve d. a downward movement along the aggregate demand curve e. no change in the aggregate demand curve as well as no movement along itarrow_forwardWhich of the following statements concerning the aggregate demand and aggregate supply model is correct? a. The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply. b. The price level and quantity of output adjust to bring aggregate demand and supply into balance. c. The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price. d. The aggregate demand shows the quantity of goods and services that firms are willing to produce at a given price level.arrow_forward
- In an economy the aggregate demand is less than aggregate supply explain the changes that will take place in this economy.arrow_forwardWhat happens to the Aggregate Demand (AD) when there is an increase in Government purchases.arrow_forwardConsidering the formula for Aggregate Demand (Also known as the product market) answer the following question:Name two macroeconomic variables (from this formula) that decline when the economy goes into recession, and explain why this happens?Name one macroeconomic variable (from this formula) that rises during a recession, and explain why this happens?arrow_forward
- The graphs illustrate an initial equilibrium for the economy. Suppose that the government increases taxes. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Aggregate price level Short-run graph LRAS SRAS Short-run equilibrium Real GDP AD Aggregate price level Long-run graph LRAS Long-run equilibrium Real GDP AD SRAS gatearrow_forwardHow does increased government spending affect the aggregate demand curve?arrow_forwardEconomic activity is subject to fluctuations (booms and slumps). Which of the following statements is correct for the US economy, considering the entire period from 1870-2015? Select one: a. Economic fluctuations have been reduced by automatic stabilizers as the size of government has increased b. The main cause of economic fluctuations over this period has been the size of the agricultural sector and the effects of weather. c. Economic fluctuations have increased due to the speed with which money moves around the world in recent years d. Bank failures and financial crises were the main causes of economic fluctuations.arrow_forward
- The graphs illustrate an initial equilibrium for the economy. Suppose that the government increases spending. Use the graphs to show the new positions of aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS) in both the short run and the long run, as well as the short‑run and long‑run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Adjust the graph. explain the second image as well and which is right.arrow_forwardHow do changes in expectations, fiscal policy and monetary policy, and the world economy change aggregate demand and the aggregate demand curve?arrow_forwardA change in any factor that influences our planned expenditure other than the price level, brings a change in aggregate demand. One of these factors is fiscal and monetary policy.” In terms of the statement above, assess how fiscal and monetary policy influences aggregate expenditure in an economy. Use appropriate diagrams to motivate your answer.arrow_forward
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