Answered: When taxes increase, consumption _____,…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 5DQ

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Question

When taxes increase, consumption _____, business investment ______, and real GDP output ______.

A. decreases shifting aggregate demand left; decreases shifting aggregate supply left;

decreases reducing economic growth, and lowering the standard of living.

B. increases shifting aggregate demand right; increases shifting aggregate supply right;

increases resulting in sustained economic growth, and a higher standard of living.

C. decreases shifting aggregate demand left; decreases shifting aggregate supply left;

increases resulting in sustained economic growth, equality and prosperity for all.

D. None of the answers are correct.

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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