Suppose the government increases lump-sum taxes. This causes
A) consumption spending to decrease and spending on imports to increase. The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most.
B) disposable income to decrease, which causes consumption spending to decrease and aggregate demand to decrease.
C) government spending to decrease, which causes aggregate demand to decrease.
D) disposable income to decrease, which causes aggregate supply to decrease.
B
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Entry into a competitive market will continue until
A) economic profits are zero. B) normal profits are zero. C) when accounting losses are zero. D) a. and b. are true
Suppose that the quantity of apples sold increases by 30 percent after the price of pears increases by 15 percent. What is the coefficient of cross elasticity of demand?
a. 3.0 b. 1.5 c. 0.2 d. 2.0 e. 0.3
The real interest rate is 4 percent and the nominal interest rate is 6 percent. Is there inflation or deflation? What is the inflation or deflation rate?
a. deflation; 2 percent b. deflation; 10 percent c. inflation; 2 percent d. inflation; 10 percent
Expansionary monetary policy, by increasing the money supply, also increases interest rates and recessionary gaps.
a. true b. false