If a “liberal” wanted to decrease aggregate demand, which of the following would he or she tend to favor?
A. An increase in government spending, because it will increase the size of the public sector.
B. A decrease in government spending, because it keeps the public sector small.
C. An increase in transfer payments, because it has a larger multiplier than tax changes.
D. An increase in taxes, because it makes the public sector larger.
Answer: D
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Information asymmetries are defined to be when:
A. one party to a transaction has more information that another. B. information isn’t readily available to anyone. C. both sides to a transaction have equal information. D. one party withholds information from the other party.
The Fed was created
A) after financial panics in the late 1800s and early 1900s. B) after the stock market crash of 1929. C) to help finance government expenditures during World War II. D) to help channel funds to the residential mortgage market.
The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. Bobby's demand for snacks is
A) unit elastic. B) elastic. C) inelastic. D) perfectly elastic.
According to the income effect, when the price of automobiles rises, people buy fewer automobiles because:
a. they substitute other forms of transportation for driving. b. the nominal amount of their paychecks is smaller. c. the purchasing power of their income is reduced. d. their demand for automobiles is very elastic.