29 The government is considering two plans to cut taxes. Under option get a $1,0

Question

29 The government is considering two plans to cut taxes. Under option get a $1,000 tax cut for this year only. Under option Y each person w cut each year for the next thirty years. · X each person will will get a $1,000 tax Which of the following statements is true if economic agents according to the Keynesian consumption function? make their decisions a) b) option X will raise consumption more than option Y this year option Y will raise consumption more than option X this year c option X and Y will raise consumption by an equal amount this year neither option X nor option Y will raise consumption this year d) 30. Which of the following serves as an automatic stabilizer as discussed in class? a) Social Security b) c) defense spending by the government d) open market purchases of government debt by the Federal Reserve unemployment insurance Consider the spending multiplier with taxes. Ifthe marginal tax rate is equal to 100% it follows that: 31 ) The spending multiplier with taxes will equal the spending multiplier with no taxes c) d) there will be no multiplier effect the multiplier effect will be infinite the spending multiplier with taxes will exceed the spending multiplier with no taxes Suppose that the Federal Reserve conducts an open market purchase of government debt. This is a form of 32. a expansionary fiscal policy b) contractionary fiscal policy c) expansionary monetary policy d) contractionary monetary policy 33. Suppose that the Federal Reserve conducts an open market purchase of government debt. This will cause: interest rates and investment to both rise b) c) d) a) interest rates to fall and investment to rise interest rates to rise and investment to fall interest rates and investment to both fall

Explanation / Answer

D) neither option X or option Y will raise consumption this year

B) unemployment insurance

A)

D) contractionary monetary policy, as money would be sucked out.

C)

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