The Keynesian perspective on the effect of an increase in taxes is that this policy action
A. generates reductions in consumption and an increase in saving to pay for the new taxes.
B. increases current consumption and reduces future consumption.
C. generates reductions in consumption and in saving.
D. has no impact on consumption.
Answer: C
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A government budget deficit ________ the ________ interest rate and crowds out private investment, which ________ real GDP growth
A) raises; nominal; slows B) raises; real; slows C) raises; real; accelerates D) lowers; real; slows E) lowers; nominal; slows
You are more likely to hire a plumber to repair a leaky drain pipe
a. as the tax rate on your earned income rises b. if you already own the specialized tools required to complete the plumbing repair work c. following an increase in the opportunity cost of your time d. the more knowledge and experience in plumbing repair work that you possess e. as the transaction cost of entering into a plumbing contract increases due to government regulations
Anything that would cause people to want to hold more of their money as cash and less in the form of check able deposits would
a. increase the multiple expansion of the money supply. b. cause the Federal Reserve to raise the reserve requirement. c. reduce the multiple expansion of the money supply. d. increase the size of the money supply.
In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,
A. higher water prices can reduce quantity demanded but cannot increase quantity supplied. B. the supply of water is perfectly inelastic because it is a finite resource. C. water production is characterized by increasing opportunity costs. D. markets cannot reach equilibrium because there is a persistent shortage of water.