Explain how a change in tax rates influences aggregate demand and aggregate supply
What will be an ideal response?
A change in tax rates will influence consumer spending and business investment spending, both of which are components of aggregate demand. For example, if tax rates decrease, consumers and businesses will have more income to spend, and the spending increases will increase aggregate demand. If tax rates decrease, labor supply and output will tend to increase because businesses will pay less in taxes and therefore have more to spend on labor and capital, and these changes will increase aggregate supply.
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Let MUa and MUb stand for the marginal utilities of apples and bagels. Let Pa and Pb stand for their prices. The general necessary condition for consumer equilibrium is
A) MUa = MUb. B) MUa = MUb and Pa = Pb. C) MUa/Pa = MUb/Pb. D) MUa/MUb = Pb/Pa.
Bonds can be risky investments because
A. bondholders are paid from whatever remains after stockholders have been paid what the corporation owes them. B. if the corporation loses its assets, the bondholders may not receive payment on their investments. C. the general price level may fall. D. the voting power of an individual bondholder may be more apparent than real.
It is possible for the balance of trade to be negative, and the current account to be positive
a. True b. False Indicate whether the statement is true or false
In the late 1990s, aggregate demand was growing rapidly, but productivity grew even more rapidly. What happened to prices and output?
A. output went up a lot, prices went up some B. prices went up a lot, output went up some C. output went down, prices went up some D. both prices and output went down E. both prices and output remain unchanged