Assume that there is no accelerator affect. The MPC = 3/4 . The government increases both expenditures and taxes by $600 . The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone. The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand. How much does aggregate demand shift by?
a. $1480
b. $480
c. $160
d. None of the above is correct.
b
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According to the EPA’s first prospective study of the Clean Air Act Amendments (CAAA) of 1990,
a. these amendments do not pass the feasibility test b. the estimated present value of benefits outweigh the present value of costs c. the CAAA achieve allocative efficiency d. the present value of net benefits associated with these amendments are negative
The income effect results in consumers increasing the quantity of normal goods demanded when the price falls
Indicate whether the statement is true or false
Which of the following is considered contractionary fiscal policy?
A) The New Jersey legislature cuts highway spending to balance its budget. B) Legislation removes a college tuition deduction from federal income taxes. C) Congress increases the income tax rate. D) Congress increases defense spending.
Which of the following is most likely to create diseconomies of scale?
A) concentration of production in a small number of very large plants. B) the use of automation devices. C) technological advance. D) division of labor.