Explain why proponents of supply-side effects of tax rate variations who also believe that tax-rate changes influence aggregate demand might claim that cuts in marginal income tax rates can potentially push up real Gross Domestic Product (GDP) without generating inflation.
What will be an ideal response?
According to supply-side economics, a reduction in marginal income tax rates causes the aggregate supply curve to shift rightward. If such tax-rate reductions also cause total planned expenditures to rise and generate an equal-sized rightward shift of the aggregate demand curve, then equilibrium real Gross Domestic Product (GDP) rises, but the equilibrium price level remains the same.
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Why is growth in GDP different from growth in a nation's standard of living? Is it possible for a nation's GDP to grow while its standard of living falls?
What will be an ideal response?
Keesha consumes only milkshakes and burgers. At her consumer equilibrium, which of the following is TRUE when Keesha can buy any portion of a unit of a milkshake or burger?
A) The marginal utility per dollar from a milkshake will exceed the marginal utility per dollar from a burger if she likes burgers more than milkshakes. B) The marginal utility per dollar from a burger will exceed the marginal utility per dollar from a milkshake if she likes burgers more than milkshakes. C) The marginal utility per dollar will be the same for each good. D) The marginal utility will be the same for each good.
A one-time tax rebate, which is not expected to be extended in future years, will
A) have a significant positive effect on consumption and aggregate demand, with aggregate demand growing by a multiple of the tax rebate. B) have no effect on consumption and aggregate demand. C) increase aggregate supply and aggregate demand. D) have a moderately positive effect on consumption and aggregate demand.
Which of the following caused the supply curve for HD televisions to shift to the right?
a. the falling prices of component parts b. the increasing prices of shipping parts c. old, outdated factories d. lack of technological advances