For example, let's say consumers receive a tax cut of 50
What will be an ideal response?What will be an ideal response?
If they spent it all, that would add 50 to aggregate demand. But according to the "marginal propensity to consume" (mpc) principle, consumers are likely to use a portion of the tax cut to increase saving or reduce debt. With the mpc of 0.8 that we used for our basic model in Chapter 9, the portion saved will be 0.2 3 50 = 10, leaving 40 for increased consumption. Thus the effect on aggregate demand would be only 40, not 50 (since saving is not part of aggregate demand)
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As a plaintiff, all of the following will help you negotiate a larger settlement except which one?
A) increasing the defendant's estimate of damages B) decreasing the defendant's estimate of damages C) increasing the defendant's cost of litigation D) raising the defendant's subjective probability that you will win
A tax that is levied in such a way that low-income taxpayers pay a greater proportion of their income toward taxes than do high-income taxpayers is called a:
A. proportional tax. B. progressive tax. C. regressive tax. D. flat tax.
Government-produced goods are added to GDP at
a. their market value. b. the value they have to their users. c. the value of the inputs used to produce them. d. the value Congress places on them.
With a marginal propensity to save of .4, the marginal propensity to consume will be:
A. 1.0 minus .4. B. .4 minus 1.0. C. the reciprocal of the MPS. D. .4.