(Exhibit: IS-LM Fiscal Policy) Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a tax cut would generate the new equilibrium combination of interest rate and income:
What will be an ideal response?
r2, Y3
You might also like to view...
The best description of US economic growth during the 1800s is:
a. The annual growth rate for the 20 years preceding the Civil War was about the same as the annual growth rate from 1870-1899 while the growth rate during the Civil War was higher than either period. b. The annual growth rate for the 20 years preceding the Civil War was lower than the annual growth rate from 1870-1899 c. The annual growth rate for the 20 years preceding the Civil War was greater than the annual growth rate from 1870-1899
When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing
a. a violation of conventional market forces. b. over-investment. c. the entry of new firms. d. too few firms in the market.
If the demand function for apples is P = 1 - Q, how much consumer surplus does the consumer gain when the price of the apples equals 5?
A. 25 B. 5 C. 12.5 D. 20
The endowment effect is used to describe the mistake a consumer makes when he accounts for the monetary costs of his decisions but ignores the nonmonetary opportunity costs.
a. true b. false