EBK PRINCIPLES OF ECONOMICS
8th Edition
ISBN: 8220103600453
Author: Mankiw
Publisher: CENGAGE L
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Chapter 34, Problem 2CQQ
To determine
Relation between government purchases, tax, and aggregate demand .
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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.
One way that the government can increase aggregate demand is by:
A. reducing income taxes.
B. increasing the interest rates.
C. reducing government spending.
D. increasing business taxes.
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- 1arrow_forwardWhat effect does an increase in government spending have on the aggregate demand curve in an economy? A. The aggregate demand curve shifts to the left. B. The aggregate demand curve becomes steeper. C. The aggregate demand curve shifts to the right. D. The aggregate demand curve becomes flatter.arrow_forward21. If taxes a. increase, then consumption increases, and aggregate demand shifts leftward. b. increase, then consumption decreases, and aggregate demand shifts rightward. c. decrease, then consumption increases, and aggregate demand shifts rightward. d. decrease, then consumption decreases, and aggregate demand shifts leftward.arrow_forward
- If taxes are lowered, we can expect supply-side economists to support the decision to do so because a. government revenues will increase in the long run. b. government spending will decrease in the long run. c. the government will spend more in the short run. d. economic growth cannot occur without it.arrow_forwardsupply-side economists believe that a reduction in the tax rate a. always decrease government tax revenue b. shifts the aggregate supply curve to the right c. would decrease consumption d. provides no incentive for people to work more d. provides no incentive for people to work morearrow_forwardNonearrow_forward
- ANSWER it correctly please. I ll rate accordingly. Typed answer only and do fast. Don't stuck.arrow_forwardGive typing answer with explanation and conclusionarrow_forwardExplain the effect of tax increases on savings on aggregate supply using the model of the macroeconomy. Price Level (average price per unit of output) AS Output (real GDP per period) The results are that a. the equilibrium rate of output (Click to select) b. the equilibrium price level (Click to select) ✓ c. unemployment (Click to select) V ADarrow_forward
- By decreasing government spending and aggregate demand, the policy ________ the price level and ________ equilibrium real GDP, ceteris paribus. Select one: a. decreases; increases b. increases; decreases c. increases; increases d. decreases; decreasesarrow_forwardEqual increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded. a. True b. Falsearrow_forwardIf the government wants to expand aggregatedemand, it can _________ government purchases or_________ taxes.a. increase; increaseb. increase; decreasec. decrease; increased. decrease; decreasearrow_forward
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