ECON.TODAY (COMPLETE)-TEXT ONLY
ECON.TODAY (COMPLETE)-TEXT ONLY
18th Edition
ISBN: 9780133882285
Author: Miller
Publisher: PEARSON
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Chapter 8, Problem bFCT
To determine

To show: The reasons for which economists think that underground activities lower the federal tax payments by a stupendous amount of $500 billion or so.

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Increasing government purchases of goods and services would have a bigger multiplier effect on real GDP than decreasing taxes, dollar for dollar. Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b True False
It is a well-known fact that high-interest rates make loans more expensive. When interest rates are high, fewer people and businesses can afford to borrow. That lowers the amount of credit available to fund purchases, slowing consumer demand. At the same time, it encourages more people to save because they receive more on their savings rate. High-interest rates also reduce the capital available to expand businesses, strangling supply. This reduction in liquidity slows the economy and results in decrease in GDP. It is understood that the low-interest rates stimulate all types of real investments and thus economic growth. However, savings rates fall, when savers find they get less interest on their deposits, and thus they might decide to spend more. They might also put their money into slightly riskier but more profitable investments, which drives up stock prices. Based on this, it can be claimed that (especially high) interest rates are detrimental to economic growth as well as income…
What effect would an increase in aggregate demand have on price levels and GDP?  What effect would an increase in aggregate supply have on price levels and GDP? (2 points)
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