Suppose the government increases the corporate income tax rate. This is
A) an expansionary fiscal policy that will shift the aggregate demand curve to the right by an amount equal to the initial change in corporate income tax revenue times the spending
multiplier.
B) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
C) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in the corporate income tax rate times the spending multiplier.
D) an automatic fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
Answer: B) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
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A. will be greater than $5. B. will also be $5. C. will be less than $5. D. may be either greater or less than $5.
During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________
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