Why is the tax multiplier smaller (in absolute value) than the autonomous spending multiplier?
What will be an ideal response?
An increase in taxes first reduces household income by the amount of the tax. Because the MPC is always less than one, the decrease in consumer spending resulting from the increase in taxes is less than the actual increase in taxes.
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If different markets for a product produced by a monopolist can be separated and if the elasticity of demand differs between the two markets, then the monopolist will
A) be able to make higher profits by using price discrimination. B) charge a single price in all markets. C) go out of business. D) sell the product in only one of the markets with inelastic demand curves.
A decrease in the average price level leads to a decrease in the purchasing power of wealth
a. True b. False Indicate whether the statement is true or false
Which of the following statements is correct?
a. Stocks, bonds, and deposits are all similar in that each provides a common medium of exchange. b. Most buyers of stocks and bonds prefer those issued by large and familiar companies. c. Banks charge borrowers a slightly lower interest rate than they pay to depositors. d. None of the above is correct.
According to supply-side economists, lowering corporate income taxes:
A. results in wage hikes for employees but no economic growth. B. moves society toward greater income equality. C. checks the expansion of real GDP and employment. D. stimulates investment and economic growth.