A $500 increase in government spending contains more fiscal stimulus than a $500 tax cut.
Answer the following statement true (T) or false (F)
True
When government spending increases by $500, the initial spending injection will be $500. Only part of a $500 tax cut is used to increase consumption; the remainder is saved. Accordingly, the initial spending injection is less than $500. This makes tax cuts less stimulative than government purchases of equal size.
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On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?
a. The lack of a fireworks display in Yankeeville arises because of an externality. b. The lack of a fireworks display in Yankeeville is a case of market failure. c. In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately rational but socially inefficient. d. All of the above are correct.
We ADD to the GDP when goods produced abroad are sold in the United States.
Answer the following statement true (T) or false (F)
Explain why international trade is less important to the United States than it is to many other countries
What will be an ideal response?
If a tax imposed in a market generates deadweight in that market, then the tax:
A. will generate very little tax revenue. B. could still increase economic surplus, depending on how the tax revenue is spent. C. will necessarily lower economic surplus. D. will never be approved by voters.