Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 28, Problem 5DQ
To determine
The most desirable option.
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Question: What is the role of the fiscal multiplier in economic stimulus packages, and how does it contribute to economic recovery during a recession?A) The fiscal multiplier has no impact on economic stimulus packages.B) The fiscal multiplier measures the impact of government spending on the economy; a multiplier greater than 1 indicates that government spending can stimulate economic activity.C) The fiscal multiplier is the amount of money saved by the government through efficient spending.D) The fiscal multiplier is a measure of government debt resulting from stimulus spending.
consumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe the tax cuts temporary.
true or false
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Economics: Principles and Policy (MindTap Course List)
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- What is the effect of an increase in taxes when the economy is above full employment? What is the magnitude of the tax multiplier? An increase in taxes when the economy is above full employment _______ aggregate demand and real GDP, and the price level _______. A. increases; falls B. increases; rises C. does not change; does not change D. decreases; falls The magnitude of the tax multiplier is equal to _______. A. MPC times the government expenditure multiplier B. the government expenditure multiplier divided by MPC C. MPC D. the government expenditure multiplierarrow_forward4 Economist B believes that if tax rates are cut, tax revenue is likely to fall. This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base.arrow_forward10) Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment. A) taxes; interest rates B) taxes; expenditures C) interest rates; money supply D) taxes; money supplyarrow_forward
- Economicsarrow_forward1. The Multiplier and Fiscal Policy: one of the programs to combat the economic effects of the recession and pandemic was the CARES Act passed in March 2020. One of the provisions of the CARES act was a relief check of $1200 per adult and $500 per dependent child. These payments were actually advance rebates on 2020 taxes and so the payments came from the IRS. This tax cut distributed about $300 billion to most, but not all of the U.S. population. Major exceptions included families with undocumented members (which invalidated the whole family, even those who were legal residents or U.S. citizens), dependent adults (which invalidated many college students as well as seniors living with their children). The program was phased out for individuals making more than $75,000 and married couples earning more than $150,000. Which of the following statements is correct about the multiplier effect of this part of the CARES act? Group of answer choices The multiplier effect would be greater than…arrow_forward6. Changes in taxes The following graph shows the aggregate demand curve. Shift the aggregate demand curve on the graph to show the impact of a tax cut. PRICE LEVEL 130 120 110 100 90 80 70 0 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand (2) Suppose the governments of two different economies, economy A and economy B, Implement a permanent tax cut of the same size. The marginal propensity to consume (MPC) in economy A is 0.7 and the MPC in economy B is 0.85. The economies are identical in all other respects. The tax cut will have a smaller impact on aggregate demand in the economy with thearrow_forward
- Which of the following can tax cuts influence? a. aggregate demand and aggregate supply b. aggregate demand but not aggregate supply c. aggregate supply but not aggregate demand d. neither aggregate demand nor aggregate supplyarrow_forward8. Changes in taxes The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. PRICE LEVEL 130 120 110 100 8 90 80 70 0 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand ? Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. Investment spending in economy Y is more sensitive to changes in the interest rate than investment spending in economy Z. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with thearrow_forwardGive typing answer with explanation and conclusion Suppose that the typical Canadian spends 80 percent of their income. There is an income tax rate is 15% per period. If the government wanted to see the effect of a tax cut of $50 billion, what would be the tax multiplier that they would have to use.arrow_forward
- Please help me answer this question. Thanks in advancearrow_forwardHave the spending and taxes of the U.S. federal government generally had an upward or a downward trend in the last few decades?arrow_forwardWhat is the main reason for employing expansionary fiscal policy during a recession?arrow_forward
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