Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 18.10, Problem 2ST
To determine
Reason for economist who believes that the government spending multiplier is larger than the tax multiplier
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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.
According to Keynesian economics, what impact would a balanced budget amendment to the constitution requiring the federal government to balance its budget annually have on the economy?
Discuss three reasons why the use of fiscal policy to stabilize the economy is more complicated than suggested by the basic Keynesian model.
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- According to the traditional Keynesian analysis, if the government increases spending and pays for all of it by raising current taxes, then a budget deficit will occur. a budget surplus will occur. aggregate demand will decrease. aggregate demand will increase.arrow_forwardAccording 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?arrow_forwardConsider the Keynesian Cross model. If the fiscal multiplier equals 2, and the government decides to increase government purchases by 100, by how much would equilibrium output increase?arrow_forward
- According to the classical macroeconomic model, expansionary fiscal policy has an inflationary effect True or falsearrow_forwardConsider 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_forwardAccording 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.falsearrow_forward
- The various kinds of automatic stabilizers are: Group of answer choices Expansionary Monetary Policy All of them Taxes and Transfer payments Increased Defense spendingarrow_forwardAccording to Keynesian economics, which of the following is effective fiscal policy when there is a problem of unemployment?a) reduce market prices.b) increase government purchasesc) doubling the money supply.d) reduce interest rates significantly.arrow_forward
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