Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 32, Problem 8MCQ
To determine
The effects on the economy, if there is a tax cut.
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Chapter 32 Solutions
Foundations of Economics (8th Edition)
Ch. 32 - Prob. 1SPPACh. 32 - Prob. 2SPPACh. 32 - Prob. 3SPPACh. 32 - Prob. 4SPPACh. 32 - Prob. 5SPPACh. 32 - Prob. 6SPPACh. 32 - Prob. 7SPPACh. 32 - Prob. 8SPPACh. 32 - Prob. 9SPPACh. 32 - Prob. 10SPPA
Ch. 32 - Prob. 1IAPACh. 32 - Prob. 2IAPACh. 32 - Prob. 3IAPACh. 32 - Prob. 4IAPACh. 32 - Prob. 5IAPACh. 32 - Prob. 6IAPACh. 32 - Prob. 7IAPACh. 32 - Prob. 8IAPACh. 32 - Prob. 9IAPACh. 32 - Prob. 10IAPACh. 32 - Prob. 11IAPACh. 32 - Prob. 1MCQCh. 32 - Prob. 2MCQCh. 32 - Prob. 3MCQCh. 32 - Prob. 4MCQCh. 32 - Prob. 5MCQCh. 32 - Prob. 6MCQCh. 32 - Prob. 7MCQCh. 32 - Prob. 8MCQ
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- please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearlyarrow_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_forwardCountry D experiences a recession due to a decrease in consumer confidence. There are two economists, Andrew and Betty. Betty suggests the government to do nothing. Andrew suggests the government to implement fiscal policies to revive the economy as soon as possible. If the government adopts Betty’s policy, draw an AD-AS graph to show what happens to the economy in short run and then long run after the decrease in consumer confidence. Suppose the government adopts Andrew’s policy. (i) Will the government increase or decrease spending? (ii) The government cuts the income tax rate. After cutting the income tax rate, the total income tax revenue collected increases. Explain why. (iii) Will Andrew’s policy be more effective if MPC is smaller? Give one advantage of Betty’s policy over Andrew’s policy.arrow_forward
- 17 - If taxes (T) increase, total expenditures decrease. In what direction does the demand curve shift?A) To the rightB) Moves on CurveC) NoneD) leftE) immutablearrow_forwardP Tax Rate (%) B C Tax Revenue ($) Refer to the graph. Critics of supply-side economics would argue that tax rates are currently between Ob and d and that a decrease in tax rates will increase tax revenues. 0 and b and that a decrease in tax rates will increase tax revenues. 0 and b and that a decrease in tax rates will decrease tax revenues. Ob and d and that a decrease in tax rates will decrease tax revenues.arrow_forwardTax Policy Suppose the economy is operating at potential GDP. Then the federal government decides to implement a large tax cut. In the long run, the change in price expectations created by the tax cut shifts aggregate demand right. aggregate demand left. aggregate supply right. aggregate supply left.arrow_forward
- When the government wants to ________ the economy, it will ________ taxation to help ________ aggregate demand and output. expand; decrease; increase expand; increase; decrease contract; decrease; increase contract; decrease; decrease expand; increase; increasearrow_forwardconsumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe the tax cuts temporary. true or falsearrow_forwardQuestion 21 An increase in real per capita GDP in an economy would __________ the average standard of living and would _________ life expectancy. raise; have little effect on raise; shorten raise; increase have no effect on; increase lower; shorten Question 22 An increase in _________ would lead to an increase in long-run economic growth. consumer spending and borrowing government taxes and fees resources and technology imports and exports prices and interest rates Question 23 Which of the following are the three major categories of resources? physical capital, technology, institutions land, labor, technology institutions, human capital, land natural resources, physical capital, human capital labor, physical capital, technologyarrow_forward
- There is an _________ relationship between tax rate and supply of a goodarrow_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_forwardTaxes on corporate income generate more revenuethan individual income taxes.True______ False______arrow_forward
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