Assume that the economy is currently in short-run equilibrium, then personal income taxes decline. Describe the correct sequence of events that happen as the economy adjusts to a new short-run equilibrium (be sure to state what the impact would be on the price level and Real GDP)
As personal income taxes decline, households will have more after-tax income so they will be able to purchase more goods and services. The resulting increase in consumption will raise aggregate demand (AD). This would push the AD curve rightward, resulting in an increase in the price level and an increase in Real GDP.
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The demand curve for a Giffen good slopes upward
Indicate whether the statement is true or false
Suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. You will have greater ability to independently set prices for your product if:
A) there are no close substitutes for your product. B) there are lots of other firms selling closely related products in your market. C) your market is perfectly competitive. D) none of the above
Which of the following will lead to a decrease in the firm's short-run demand for labor?
A) an increase in the price of the final product B) an increase in price of the final product's substitute good C) a decline in labor productivity D) an increase in the number of buyers for the final product
If the marginal propensity to consume in an economy is 0.5, then a $1,000 increase in government spending will increase aggregate demand by $4,000
a. True b. False Indicate whether the statement is true or false