If the government cuts taxes by $200 million and simultaneously decreases government spending by $200 million,then
A) Aggregate demand will rise because the government decrease in purchases occurs so slowly.
B) Aggregate demand in the economy will remain unchanged.
C) People will spend only part of their tax cut,so aggregate demand will eventually rise by $200 million.
D) Aggregate demand will decrease by $200 million.
Correct Answer:
Verified
Q46: Ceteris paribus,if income was transferred from individuals
Q47: Given a $500 billion AD shortfall and
Q48: A marginal propensity to save (MPS)of 0.25
Q49: Jack has an MPC of 0.82 and
Q50: A tax cut has a smaller impact
Q52: Assume the MPC is 0.80.If the government
Q53: If the desired fiscal stimulus is $20
Q54: If the MPC equals 0.80,a $200 billion
Q55: Suppose the government decides to increase taxes
Q56: Assume the MPC is 0.75,taxes increase by
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents