On average, does an increase in taxes raise or lower real GDP? If taxes as a percent of GDP go up 1 percent, by how much does real GDP change? Are the decreases in real GDP caused by tax increases temporary or permanent? Does the intention of a tax increase matter?

Q: Which of the following would be an expansionary fiscl policy? Placing a limit on government…

A: Fiscal policy refers to the use of government expenditure and tax policies to manipulate economic…

Q: Is it easier for governments to change taxes or spending plans? Why? What doesthis imply for policy?

A: Fiscal policies are the measures used by the government to affect the economy. The major fiscal…

Q: While all economic theories say the government can positively affect the economy, some theories say…

A: The term "government intervention" refers to the situation in which a government acting as a rule…

Q: Why is a $100 billion increase in government spending on goods and services more expansionary than a…

A: According to the aggregate expenditure model Total income (Y) = Consumption (c +b(Y-Taxes) +…

Q: Consider an economy in which tax collections are always $400 and in which the four components of…

A: Given the table, To find the equilibrium of this economy graphically, graph AE curve and the…

Q: Suppose that real GDP for an economy is currently 16,000 billion, the government purchases…

A: Fiscal policy refers to the actions taken by the government to intefere in the economic activity and…

Q: consumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe…

A: This is explained by the permanent income hypothesis which implies that people will spend money…

Q: is it always possible to increase tax revenues by increasing tax rates?(please draw the relevant…

A: If we impose a tax in a free market equilibrium situation, definitely some amount of producer…

Q: Why is the tax multiplier smaller than the government spending multiplier?

A: Spending & taxation are the two main instruments of fiscal policy. The government can either…

Q: Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive.…

A: The tax is a unilateral payment made by the people towards the government for various purposes such…

Q: What would happen to real GDP and the price level if the government decides to boost expenditure…

A: GDP calculates the monetary value of the final goods and services—those purchased by the…

Q: 2. Use the following equations for exercises to answer the following questions. C = $100 + 0.8Y I=…

A: Given information are as follows.     (a)   The equilibrium level of real GDP can be calculated as…

Q: Will consumers always spend the same percentage of any tax cut?  Why might they spend more or less…

A: Answer - Consumers will not always spend the same percentage of a tax cut. This is mean that,…

Q: If the government got rid of sales tax, how might this affect the market? shift AD to the right…

A: When the government rid of sales tax, then the price of the goods decreases. Decreasing price leads…

Q: Does MPC matter when using taxes to stimulate the economy in the short-run?

A: The stimulation of the economy using taxes involves fiscal policy. The expansionary/contractionary…

Q: Suppose the US Federal Government decides to increase its spending without issuing debt by raising…

A: Economy is at the natural level if the GDP is at the potential level, inflation is at the expected…

Q: Illustrate each of the following situations with a graph showing IS curve: a. An increase in…

A: The IS curve slopes downward from left to right because as the interest rates falls, investment…

Q: What might be the consequences If congress were to cut individual income tax rates in half ?

A: Tax cut proponents argue that lowering taxes boosts spending, which helps the economy. Those who…

Q: Along any given IS curve: a. government spending is fixed, but tax rates vary. b. tax rates are…

A: IS-LM stands for "investment savings-liquidity preference-money supply," or "investment…

Q: What is fiscal​ imbalance? Fiscal imbalance is the​ _______ value of the​ government's commitments…

A: What is the fiscal​ imbalance? Fiscal imbalance refers to a situation where all of the government's…

Q: What is the best policy to implement with regard to taxes?

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and…

Q: Suppose that the government wants to increase real GDP in the short run. To accomplish this it…

A: Increase government expenditures ----- is correct

Q: f you have the power to cut or increase taxes in your country with the aim of boosting aggregate…

A: Aggregate demand has the following components AD = C + I + G + NX  Where, C - Consumption, I -…

Q: Should the government fight recessions with spending hikes rather than tax cuts ? Explain

A: Government spending and tax reductions have different multiplying effects on the economy.

Q: Use the following equations for exercises                                                     C = $…

A: C = $ 100 + .8 Y  I = $ 200  G = $ 250  X = $100 - .2 Y b=MPC = 0.8 GDP = C+ I + G + X GDP (Y)= 100…

Q: Suppose the government implements contractionary fiscal policy. As a result, the inflation rate will…

A: Actions by the government to either expand or tighten the economy, are under the “fiscal policy”,…

Q: Which of the following is incorrect regarding tax revenues? a.they increase during recessions…

A: The correct solution is option a.

Q: What is fiscal policy? When should fiscal policy be used? Are there any negatives associated with…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: Suppose the MPC is 0.8. What is the tax multiplier in this economy? If the government were to lower…

A: Tax multiplier = - MPC / (1 - MPC)  = - 0.8 / (1 - 0.8) = - 0.8 / 0.2 = - 4

Q: Please help me answer the following questions with graphs:  Suppose there is a reduction in income…

A: Taxes are an important government policy instrument that is used to collect revenue from the public…

Q: If prices are constant economic incidence would be the more than legislative (statutory) incidence.…

A: If prices are constant economic incidence would be the more than legislative (statutory) incidence.…

Q: Logically discuss the impact of the increase in government taxes on consumption.

A: Taxes are the compulsory payments made by any firm or an individual to the government without having…

Q: If the MPS in an economy is 0.2. What is the tax multiplier? Group of answer choices a. 4 b. 5 c. -4…

A: Tax multiplier = - (1 - MPS) / MPS = - (1 - 0.2) / 0.2 = - 0.8 / 0.2 = - 4

Q: Why does a balanced budget increase in spending and taxes increase aggregate demand?

A: balanced budget increase in spending and taxes mean that, both government spending (G) and taxes (T)…

Q: Do tax cuts increase economic growth and taxable income so much that tax revenue increases?

A: Tax cuts are the fall in the amount of money of the taxpayers which are added to the revenue of the…

Q: What are the justifications for imposing tax on consumption instead of income by the government of…

A: Consumption tax argue that it encourages saving and investment and makes the economy more efficient.…

Q: If taxes are reduced , will most people save more or less than before ? Does national saving rise or…

A: The aggregate spending behaviors of families and public and private substances can swiftly influence…

Q: Suppose that the government wants to achieve higher output level and lower unemployment rate at the…

A: Fiscal policy is broadly defined as the policy regime undertaken by the government in order to…

Q: According to the Laffer curve below, what would happen if we move from Point D to B? Taxes would…

A: The laffer curve shows tax revenue on the y axis and tax rate on the x-axis.

Q: Imagine that a group of advisors to the president has suggested providing a tax cut for the middle…

A: Solution part (1).   Suggested approach of providing a tax cut for middile class in order to…