The initial effect of tax reduction on aggregate demand .

Question

Assuming the economy is in long run and the govt implemnents a tax cut of $420 Billion, there is no crowding out, and marginal propensity to consume is 0.9 what's the initial and total effect of the tax reduction on aggregate demand? Is there a formula to calculate this?

Answer 1

Question

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

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Assuming the economy is in long run and the govt implemnents a tax cut of $420 Billion, there is no crowding out, and marginal propensity to consume is 0.9 what's the initial and total effect of the tax reduction on aggregate demand? Is there a formula to calculate this?

Answer 2

Question

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

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Answer 3

Question

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

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Answer 4

Question

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

Expert Solution & Answer

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Answer 5

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

Answer 6

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Answer 7

Chapter 21, Problem 8PA

Subpart (a):

To determine

The initial effect of tax reduction on aggregate demand.

Answer 8

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Answer 9

Subpart (b):

To determine

The total effects of tax reduction on aggregate demand.

Answer 10

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Answer 11

Subpart (c):

To determine

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

Answer 12

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

Answer 13

Subpart (d):

To determine

How can the Government increase aggregate demand without changing the government’s budget deficit.

Answer 14

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Answer 25

Ch. 21.1 - Prob. 1QQ Ch. 21.2 - Prob. 2QQ Ch. 21.3 - Prob. 3QQ Ch. 21 - Prob. 1QR Ch. 21 - Prob. 2QR Ch. 21 - Prob. 3QR Ch. 21 - Prob. 4QR Ch. 21 - Prob. 5QR Ch. 21 - Prob. 1QCMC Ch. 21 - Prob. 2QCMC

The initial effect of tax reduction on aggregate demand .

Solution Summary: The author explains the initial effect of tax reduction on aggregate demand, which increases consumption by 15 billion due to an increase in disposable income.

The initial effect of tax reduction on aggregate demand.

The total effects of tax reduction on aggregate demand.

The comparison of total effects of tax reduction to the total effects of increase in Government purchases.

How can the Government increase aggregate demand without changing the government’s budget deficit.

Chapter 21 Solutions