Assume the economy is in a recession and the Federal government decides to cut personal income tax rates. All else equal, the cut in tax rates should
A) increase consumption expenditures and cause real GDP to increase relative to potential GDP.
B) increase the nominal interest rate and cause potential GDP to increase relative to real GDP.
C) decrease the real interest rate and decrease expectations of inflation.
D) increase the target interest rate and cause real GDP to fall relative to potential GDP.
A
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If the intersection of the IS curve with the horizontal axis comes at a level of output below the natural level of output, lowering interest rate to zero will
A) bring economy back to natural output. B) not bring the economy back to natural output. C) will have inflationary effects on the economy. D) will cause saving rates to increase.
A decrease in the real interest rate in the United States will cause the dollar to ________ relative to other currencies and ________ net exports and real GDP
A) appreciate; increase B) appreciate; reduce C) depreciate; increase D) depreciate; reduce
In a market for emission permits, firms that emit over their allowed limits
A) are forced to shut down. B) are taxed by the government for the amount of emissions. C) receive a subsidy for the amount of emissions. D) pay a price of these emissions.
If the cost of the capital is 9%, is the investment feasible?
a. Yes because the NPV>0 b. Yes because the NPV=0 c. No because the NPV<0 d. Need information on the marginal benefits and costs