Briefly explain how changes in business taxes would affect aggregate demand. Give an example.
What will be an ideal response?
Student examples will vary. A sample answer follows. The federal government can also influence investment spending through business taxes. For example, a tax cut for firms may increase investment spending and shift the aggregate demand curve to the right. Suppose that business tax rates drop 10%. Each business will then have more money to spend on equipment or on research and development. The total of all that increased spending by individual firms will shift the aggregate demand curve to the right.
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The flatter is the LM curve
A) the more effective is fiscal policy. B) the less effective is fiscal policy. C) the less is the interest sensitivity of saving. D) the less is the interest sensitivity of the money supply.
According to the Keynesian model, increased foreign spending for U.S. goods is likely to
a. reduce total employment in the United States. b. increase total employment in the foreign country. c. reduce total output in the United States. d. increase total output in the United States.
Patent and copyright laws are major sources of
a. natural monopolies. b. government-created monopolies. c. resource monopolies. d. antitrust regulation.
Which of the following is a type of economic analysis?
a. Association b. Resources c. None of these choices is a type of economic analysis. d. Positive