Bundle: Principles Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
8th Edition
ISBN: 9781337607650
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 36, Problem 2CQQ
To determine
The impact on aggregate demand by tax cuts and government spending.
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According to Keynesian economics, what impact would a balanced budget amendment to the constuition requiring the federal government to balance its budget annually have on the economy?
According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size.
a.true
b.false
When thinking about Keynesian fiscal policy it is the case that big changes in national income can be made by making small changes to:
(a) Exchange rates;
(b) Interest rates.
(c) Tax codes;
(d) Autonomous expenditure;
Chapter 36 Solutions
Bundle: Principles Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
Ch. 36.1 - Prob. 1QQCh. 36.2 - Prob. 2QQCh. 36.3 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 5QQCh. 36.6 - Prob. 6QQCh. 36 - Prob. 1CQQCh. 36 - Prob. 2CQQCh. 36 - Prob. 3CQQCh. 36 - Prob. 4CQQ
Ch. 36 - Prob. 5CQQCh. 36 - Prob. 6CQQCh. 36 - Prob. 1QRCh. 36 - Prob. 2QRCh. 36 - Prob. 3QRCh. 36 - Prob. 4QRCh. 36 - Prob. 5QRCh. 36 - Prob. 6QRCh. 36 - Prob. 7QRCh. 36 - Prob. 8QRCh. 36 - Prob. 9QRCh. 36 - Prob. 10QRCh. 36 - Prob. 1PACh. 36 - Prob. 2PACh. 36 - Prob. 3PACh. 36 - Prob. 4PACh. 36 - Prob. 5PACh. 36 - Prob. 6PACh. 36 - Prob. 7PACh. 36 - Prob. 8PA
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- According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the government spending multiplier? Explain the reasoning behind this relationship.arrow_forwardIn the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by and increases the equilibrium level of income by $3 billion; $9 billion $2.25 billion; $9 billion $2.25 billion; $2.25 billion $3 billion; $3 billionarrow_forwardUsing the concept in Keynesian economics, which one of the following may not be an effective fiscal policy when there is inflation? a) increasing aggregate demand b) increasing corporate taxes. c) increasing personal taxes. d) decreasing government purchases.arrow_forward
- To combat a recession, the Keynesian fiscal policy recommends the Government: Select one: a. Increases taxes and decreases government spending to balance the budget. b. increases government spending and reduces taxes. c. increases taxes. d. reduces both taxes and government spending.arrow_forwardHow would a Keynesian Economist use Fiscal Policy to fight a Recession? Please do not write about Monetary Policy here, only Fiscal Policy.arrow_forwardLet's say that our country's Gross Domestic Product is at $15 billion (this year). We also know that we currently have unemployment and that we would have full employment if our Gross Domestic Product were to reach $18.5 billion. If the Keynesian multiplier is 7, then what would Keynesian economists recommend regarding changes in government spending and taxation?arrow_forward
- Consider a Keynesian model but where investment (just like consumption) is increasing in aggregate income, e.g., because investment depends on business cash flow. Now that investment depends on aggregate income, a fiscal stimulus has more effect on equilibrium output.Answer true, false, or uncertain. Please briefly explain your answerarrow_forwardWhy will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expectedarrow_forwardIn a Keynesian model, why would a $100 million increase in government expenditure on goodsand services have a greater impact on aggregate demand than a $100 million reduction in taxrevenue?A Consumers spend only part of any extra disposable income.B Government expenditure does not create wealth.C The marginal tax rate affects the value of the multiplier.D The multiplier does not apply to consumer expenditure.arrow_forward
- If businesses and consumers become pessimistic, the government can attempt to reduce the impact on the price level and real GDP by A reducing taxes or decreasing government spending increasing taxes or increasing government spending © increasing taxes or decreasing government spending D reducing taxes or increasing government spendingarrow_forwardAnswer question 2arrow_forwardMacroeconomic** In the Keynesian model, when government decreases its spending by $20 billion, and it decreases taxes by $30 billion, and the MPC is .75, by how much will total spending in the economy change? Reg. multiplier = 4, tax multiplier = -3 Would this be 4 * 20 = 80 billion? The actual answer is 10 billion which I don't get it at all. Thanks.arrow_forward
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