Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 34, Problem 2QCMC
To determine
Relation between government purchases, tax, and aggregate demand.
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Students have asked these similar questions
The government spends $3 billion to buy police cars.Explain why aggregate demand might increase bymore or less than $3 billion.
Consider two policies, a tax cut that lasts for only 2 years and a tax cut that is expected to be permanent. Which policy will stimulate greater spending by consumers? Which policy will have the greater impact on aggregate demand?
Select one:
a. permanent tax cut; 2-year tax cut
b. permanent tax cut; permanent tax cut
c. 2-year tax cut; 2-year tax cut
d. 2-year tax cut; permanent tax cut
Draw a graph, using the Aggregate Demand – Aggregate Supply curves, the result of a tax increase and cuts in federal expenditures during a period of inflation. Label all axes and curves and show which curve shifts and indicate the new equilibrium. As well as explain your graph in words.
Chapter 34 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
- What are the components of the aggregate demand (AD) curve?arrow_forwardName some government policies that cod cause aggregate demand to shift.arrow_forwardOnly typed answer a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ ___billion b. Assuming the MPC in this nation is 0.75, how much do government purchases need to change to shift aggregate demand by the amount you found in part a? $ ___billion c. Now suppose the MPC is 0.6. To restore the economy to its long-run equilibrium, aggregate demand must be changed by $ ___billion and government purchases must be changed by $ ___billion.arrow_forward
- I know the answer is c. Could you please explain why a, b, and d are incorrect answers in detail? Q2. QQ) If the government wants to contract aggregate demand, it can _____ government purchases or _____ taxes. a.increase, increase b.increase, decrease c.decrease, increase d.decrease, decreasearrow_forwardc. If aggregate demand shifts right, what is equilibrium output? d. if aggregate demand shifts left, what is equilibrium output?arrow_forwardThe determinants of aggregate demand explain shifts in the aggregate demand curve. How does a change in investment spending affect aggregate demand? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Comment, on the likely outcome with sufficient arguments? a) Impact on aggregate demand of the economy if imports are greater than exports.b) Impact on aggregate demand if the GDP of trading partner is increasing at a faster rate than that of India.c) Inflation rate in the country has reached 6.73%.arrow_forwarda. Explain why the aggregate short-run aggregate supply curve is upward sloping?arrow_forward
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