Using the ZZ/Y and NX graphs, illustrate graphically and explain what effect a reduction in taxes will have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria
What will be an ideal response?
A reduction in T will cause an increase in C and cause ZZ to shift up as demand rises. Y will increase causing an increase in C and S. As Y rises, imports will rise. Given that exports do not change, net exports will decrease.
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Which of the following would be classified as fiscal policy?
A) The federal government cuts taxes to stimulate the economy. B) States increase taxes to fund education. C) A state government cuts taxes to help the economy of the state. D) The Federal Reserve cuts interest rates to stimulate the economy. E) The federal government passes tax cuts to encourage firms to reduce air pollution.
List three reasons why one type of labor may be paid more than another
What will be an ideal response?
Unanticipated inflation occurs when
A) everyone knows perfectly the true rate of inflation. B) the actual inflation rate differs from the anticipated inflation rate. C) the inflation rate is zero. D) there is no change in the purchasing power of money.
When the interest rate falls,
a. the opportunity cost of holding money rises. b. people shift out of holding interest-yielding bonds into holding money. c. the quantity of money people will hold decreases. d. investment spending decreases. e. real GDP will decrease.