Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 18, Problem 6QP
To determine
Explain whether all economists agree to the statement, if not why.
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Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a recessionary gap. How could a tax cut achieve the same result?
Should the government fight recessions with spending hikes rather than tax cuts ? Explain.
(Fiscal Policy) Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a recessionary gap. How could a tax cut achieve the same result?
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Economics (MindTap Course List)
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- Some politicians have suggested that the United States enact a constitutional amendment requiring that the federal government balance its budget annually. Such an amendment, if strictly enforced, would force the government to enact a contractionary fiscal policy whenever the economy experienced a severe recession. This is because when the economy enters a recession, ???arrow_forwardEconomist Arthur Laffer famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case? Did it happen following the tax cuts of 2017?arrow_forwardWhy do Republicans like tax cuts? Why are tax cuts a good thing? How does it affect the aggregate supply and demand graph?arrow_forward
- Does the amount of government spending in an economy respond directly to changes in aggregate income, wealth, or interest rates? Does it respond indirectly to changes in these variables?arrow_forwardWhich of the following statements are FALSE? (a) When the government prints money to buy goods and services the resulting inflation is a form of tax, since people will not have to pay more for their goods and services than before. (b) An effective fiscal policy macroeconomic stimulus should aim to replace private spending with public (government) spending. (c) To be effective a fiscal policy macroeconomic stimulus should have temporary increases in spending and permanent tax cuts. (d) The paradox of thrift is that the increase in saving during a recession because people postpone major purposes prolongs the recession and thus is not good for the economy, while normally saving grows the economy.arrow_forwardShould fiscal policy encourage more consumption or more saving? Does it matter? I need a reason why.arrow_forward
- How can a tax cut increase investment, and what is the impact on the economy?arrow_forwardAccording to Keynesians, when should the federal government run a budget deficit and when should it run a surplus?arrow_forwardIn 2009, the US Federal government cut taxes by approximately $300 billion, increased government spending by approximately $300 billion, and increased transfer payments by approximately $200 billion. Answer the following questions, assuming the marginal propensity to consume was 0.75. What was the maximum change in GDP from the government transfers? Show your work. If these numbers were accurate, what was the maximum change in GDP from the entire stimulus package? Show your work.arrow_forward
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