In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:
A. affect neither aggregate supply nor aggregate demand.
B. increase aggregate demand.
C. reduce aggregate demand.
D. reduce aggregate supply.
B. increase aggregate demand.
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is _____
a. 100 percent b. 60 percent c. 50 percent d. 40 percent e. 10 percent
Which of the following is a consensus view among economists with regard to fiscal policy?
a. Changes in fiscal policy exert a strong influence on real output, just as the basic Keynesian model suggests. b. Expansionary fiscal policy will not help promote recovery from a recession. c. Restrictive fiscal policy is a potent anti-inflationary weapon. d. Since changes in discretionary policy are difficult to time correctly, fiscal policy should not be altered in response to each minor disturbance.
Inflation refers to the situation when
A. the rate at which prices are rising is rising. B. all prices rise by the same rate. C. the average of all prices is increasing. D. the prices of necessities increase.