15. Suppose the government increases personal income taxes. This causes disposab

Question

15. Suppose the government increases personal income taxes. This causes disposable income to decrease, which causes consumption spending to decrease and aggregate demand a. to decrease government spending to increase, which causes aggregate demand to decrease consumption and spending on imports to increase. The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most disposable income to increase, which causes aggregate supply to decrease b. c. d. 16. Which of the following actions could be undertaken if the government wants to close a recessionary gap? a. b. c. d. increase taxes and reduce government spending reduce taxes and increase government spending increase taxes and increase government spending reduce taxes and reduce government spending 17. Suppose there currently is an inflationary gap. What should the government do to bring prices down? a. b. c. d. nothing reduce government spending increase government spending sift the long-run aggregate supply curve 18. The economy has a high level of unemployment. This would imply that the government should engage in contractionary fiscal policy and increase the tax rate that the economy is operating to the left of the LRAS curve and that government spending could be increased that fiscal policy has been ineffective and should be abandoned that the economy is operating on the SRAS curve and that government spending should be decreased a. b. c. d. 19. According to supply-side economics, lower tax rates on labor a. b. c. d. generate higher revenues for the government and increased unemployment create incentives to work more, which increases real GDP are less productive than lower tax rates on consumers have little effect on the economy

Explanation / Answer

Answer:- 15(b) government spending to increase, which causes aggregate demand to decrease.

16(c) Increase taxes and increase government spending.

17(a) Nothing

18(D) that the economy is operating on the SRAS causes and that government spending should be decreased.

19(b) create incentive to work more, which increase real GDP.

20(C) The effect time lag

21(a) cost of living adjustment to social security payment.

22(b) jane purchase a new car for commuting to and from school.

23(a) saving is flow while saving is a stock

24(d) are goode that are used to make other goods

25(d) the difference between disposable income and spending on goods and service while saving is the difference between real GDP and disposable income

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