A temporary tax cut is not likely to be effective in stimulating aggregate demand if:
a. the tax cut is large
b. the MPC is relatively high.
c. the economy experiences a contractionary gap.
d. the short-run aggregate supply curve is relatively flat.
e. people based consumption decisions on their level of permanent income.
e
You might also like to view...
Answer the next question using the figure below.
In the diagram, line AB is the U.S. production possibilities curve and line ACÂ shows the consumption possibilities for the U.S. after it has decided to engage in international trade. We can conclude that the United States
A. has decided to trade beef for cheese. B. has chosen to specialize in the production of cheese. C. is relatively more efficient than its trading partners in producing both cheese and beef. D. has chosen to specialize in the production of beef.
In the above figure, a rent ceiling of $300 per month would
A) not affect the equilibrium quantity. B) result in a surplus of 7000 units. C) result in a shortage of 7000 units. D) result in a shortage of 2000 units.
The debt service ratio is defined as
(a) the ratio of total debt to export earnings. (b) the ratio of total debt to GDP. (c) the ratio of payments on foreign debt to export earnings. (d) the ratio of payments on foreign debt to GDP.
If the market price is $3 and a perfectly competitive firm is producing 2,200 units and the marginal cost to produce the 2,200th unit is $2.85, which of the following is true?
A) The firm is maximizing profit. B) The firm should decrease production to maximize profit. C) The difference between marginal revenue and marginal cost (MR - MC) for the 2,200th unit is negative. D) The firm should increase production to maximize profit.