EXPLORING ECON.-W/ACCESS (LL) >CUSTOM<
7th Edition
ISBN: 9781305757448
Author: Sexton
Publisher: CENGAGE C
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Question
Chapter 24, Problem 11P
To determine
To explain:
The reason behind the increase in aggregate
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Examine the following policies and determine which would decrease the level of aggregate demand.
Decreasing in government spending and decreasing taxes
Increasing investment and increasing government spending
Increasing consumption and decreasing taxes
Decreasing in government spending and increasing in taxes
Suppose that the U.S. government increases its expenditure on highways and bridges by $100 billion. Explain the effect that this expenditure would have on aggregate demand and real GDP.
Consider an economy that is operating below the full-employment level of real GDP. What would be the effect of an increase in government spending on aggregate demand and real GDP?
Chapter 24 Solutions
EXPLORING ECON.-W/ACCESS (LL) >CUSTOM<
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Similar questions
- Explain why increased government spending of, for example, $15 billion, will have a different impact on aggregate demand than a $15 billion tax cut.arrow_forwardDifferentiate the macroeconomic effects, multiplier and crowding effect, that explain the causes of the differences of government spending in aggregate demand.arrow_forwardsupply-side economists believe that a reduction in the tax rate a. always decrease government tax revenue b. shifts the aggregate supply curve to the right c. would decrease consumption d. provides no incentive for people to work more d. provides no incentive for people to work morearrow_forward
- One supply-side measure introduced by the Reagan administration was a cut in income tax rates. Use an aggregate demand/aggregate supply diagram to show what effect was intended. What might happen if such a tax cut also shifted the aggregate demand curve.arrow_forwardThe Australian government is concerned about the growing budget deficit, so they decide to cut government expenditures by $15 billion. They also decide the economy needs a boost so they decide to cut income taxes by $40 billion. Would this simply mean a net increase in aggregate demand of $25 billion? Why or why not?arrow_forwardExplain with example how a reduction in taxes without a reduction in government spending may have no impact on aggregate demand.arrow_forward
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