In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To
obtain price-level stability under these conditions, the government should:
A. increase tax rates and/or reduce government spending.
B. discourage personal saving by reducing the interest rate on government bonds.
C. increase government expenditures.
D. encourage private investment by reducing corporate income taxes.
A. increase tax rates and/or reduce government spending.
You might also like to view...
An economy currently has an inflationary gap. An increase in the money wage rate will ________ the inflationary gap and ________ the price level
A) decrease; decrease B) increase; increase C) increase; decrease D) decrease; increase
Governments may exercise moral judgment in levying taxes. Items that are typically excluded include the following, except
a. milk b. bread c. cigarettes d. medicine e. books
If the consumer price index increased from 1.52 to 1.65, then it must be the case that ________ relative to prices in the base year.
A. some prices rose and some prices fell B. all prices rose C. the weighted average level of prices rose D. all prices fell
With price rationing, those who are both able and willing to pay for a product get it.
Answer the following statement true (T) or false (F)