If an economy is experiencing both full employment and price stability, within the Keynesian model, a major tax reduction probably would cause
a. an increase in unemployment in the near future.
b. an increase in the general level of prices unless government expenditures are also reduced.
c. an increase in the interest rate since individuals will reduce their savings in response to the tax cut.
d. a decrease in consumption unless the expected budget deficit is financed by selling bonds to foreigners.
B
You might also like to view...
According to monetary theory, if the money supply is growing at a rate of 5 percent, real GDP is growing at a rate of 2 percent, and velocity is constant, what will the inflation rate be?
What will be an ideal response?
If a consumer is spending all of his/her income in a manner where MUa / Pa = MUb / Pb, then the consumer:
a. should increase the consumption of A and decrease the consumption of B. b. is maximizing his/her utility. c. should increase the consumption of B and decrease the consumption of A. d. should increase the consumption of both A and B. e. should decrease the purchases of both A and B.
Discuss some of the reasons why monopoly power is considered undesirable.
What will be an ideal response?
Consider a consumer who spends all income on only two goods: pizza and soda. An extra slice of pizza would give the consumer 60 extra utils, while an extra can of soda would give the consumer 20 extra utils. Pizza costs $3 per slice, and soda costs $1 per can. In this situation, the consumer:
A. is buying too much pizza and not enough soda. B. should purchase more pizza and less soda. C. has maximized his or her total utility. D. needs to equate the marginal utilities for pizza and soda.