11. How do lower taxes affect aggregate demand? A) They increase disposable income, consumption, and aggregate demand. B) They reduce disposable income, consumption, and aggregate demand. C) They decrease corporate investment and aggregate demand. D) They increase aggregate supply and thus increase aggregate demand as well 12. Full-employment GDP is also known as

11. How do lower taxes affect aggregate demand? A) They increase disposable income, consumption, and aggregate demand. B) They reduce disposable income, consumption, and aggregate demand. C) They decrease corporate investment and aggregate demand. D) They increase aggregate supply and thus increase aggregate demand as well 12. Full-employment GDP is also known as

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 42CTQ: On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because...

See similar textbooks

Similar questions

On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?
Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?
Name some economic events not related to government policy that could cause aggregate demand to shift.
1. Suppose that the U.S. government increases its expenditure on highways and bridges by $100 billion. Explain the effect that this expenditure would have on aggregate demand and real GDP.
7 Suppose that the government increases its expenditure on goods and services by $100 billion and pays for these goods and services by raising autonomous taxes by $100 billion. What is the effect on aggregate demand and real GDP of each change individually and of the two combined
pls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?
13 Which of the following would increase aggregate demand? Increase in savings. Increase in taxation. Decrease in consumption spending. Increase in government spending.
5) What factors will shift the aggregate demand curve for a given level of real domestic income?
14 If government spending and taxes both change by the same amount, how much must they change to eliminate the recessionary gap? 15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall
1. Why is a $100 billion increase in government spending on goods and services more expansionary than a $100 billion decrease in taxes? 2. How does each of the following affect the aggregate demand curve? a. Government spending increases. b. The amount of taxes collected decreases. 3. In each of the following cases, explain whether the fiscal policy is expansionary, contractionary, or neutral. a. The government decreases government spending. b. The government increases taxes. c. The government increases spending and taxes by an equal amount. 4. Why does a reduction in taxes have a smaller multiplier effect than an increase in government spending of an equal amount?