Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 34, Problem 2QCMC
To determine
Relation between government purchases, tax, and aggregate demand .
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Students have asked these similar questions
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.
1
What 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.
Chapter 34 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- 21. 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_forwardIf 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_forward
- An increase in taxes would be a good policy A. when there is stagflation, as this policy would push aggregate supply to the right. B. during a recession, as this policy would stimulate aggregate demand. C. during a recession, as this policy would reduce aggregate supply. D. when there is inflation, as this policy would push aggregate demand to the left. E. when there is inflation, as this policy would push aggregate demand to the right. QUESTION 20 An increase in the price level will A. shift the aggregate demand curve to the left. B. shift the aggregate supply curve to the left. C. move the economy down along a stationary aggregate supply curve. D. shift the aggregate demand curve to the right. E. move the economy up along a stationary aggregate demand curve.arrow_forwardANSWER it correctly please. I ll rate accordingly. Typed answer only and do fast. Don't stuck.arrow_forwardGive typing answer with explanation and conclusionarrow_forward
- Explain 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_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
- Consider two policies, a tax cut that lasts for only 2 years and a tax cut that is expected to be permanent. Which policy will stimulate greater spending by consumers? Which policy will have the greater impact on aggregate demand? Select one: a. permanent tax cut; 2-year tax cut b. permanent tax cut; permanent tax cut c. 2-year tax cut; 2-year tax cut d. 2-year tax cut; permanent tax cutarrow_forwardA cut in personal taxes on households’ income: A shifts the aggregate demand curve to the left. B. shifts the aggregate demand curve to the right. C. moves the economy along the aggregate demand curve . D. has no effect.arrow_forwardQUESTION 25 A tax cut shifts the aggregate demand curve the farthest if a. the MPC is large and if the tax cut is temporary b. the MPC is large and if the tax cut is permanent c. the MPC is small and if the tax cut is permanent d. the MPC is small and if the tax cut is temporaryarrow_forward
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