When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program such as new interstate highway construction, the
a. tax multiplier magnifies the effect of taxes on the level of national income
b. tax, then, generates a $100 million decline in national income
c. level of national income expands by $100 million
d. effect on national income is uncertain
e. tax multiplier overpowers the income multiplier, triggering a rollback in national income
C
You might also like to view...
Smith's Shoes is a failed business enterprise, with debts of $10 million. Steve Smith has an ownership stake in Smith's shoes
Which of the following statements INCORRECTLY characterizes Steve Smith's legal liability for the debts of Smith's Shoes, depending on the firm's type of business organization? A) If Smith's Shoes is a proprietorship, then Steve Smith is fully liable for the entire $10 million in debt of the failed shoe store. B) If Steve Smith is a partner in Smith's Shoes, then his legal liability for the debts of Smith Shoes is $10 million divided by the number of partners. C) If Smith's Shoes is a corporation in which Steve Smith is a stockholder, then Steve Smith does not need to use any of his wealth to pay the debt because the company has limited liability. D) None of the above statements is incorrect.
If the central bank targets a monetary aggregate, it is likely to lose control over the interest rate because
A) of fluctuations in the demand for reserves. B) of fluctuations in the consumption function. C) bond values will tend to remain stable. D) of fluctuations in the business cycle.
Which of the following represents a way that a government can help the private market to internalize an externality?
a. taxing goods that have negative externalities b. subsidizing goods that have positive externalities c. The government cannot improve upon the outcomes of private markets. d. Both a and b are correct.
If domestic income falls, what must happen to keep the trade balance the same?
a. The real exchange rate must fall. b. Foreign income must rise. c. The domestic price level must fall. d. Domestic income must fall.