In the traditional Keynesian model, an increase in taxes leads to all of the following EXCEPT
A. an increase price level.
B. a decrease in consumption.
C. a decrease in aggregate demand.
D. lower real GDP.
Answer: A
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__________ consumption will __________ as a result of a decrease in taxes
A) Autonomous; decrease B) Autonomous; increase C) Induced; decrease D) Induced; increase
Which of the following is not an example of an externality?
a. Drunk drivers raise everyone's auto insurance premiums. b. The price of lumber increases as lumberjacks' wages increase. c. The neighbor's beautiful front yard increases your home value. d. Someone drives a car that emits thick black smoke. e. People who live near a bakery enjoy the smell of freshly baked bread.
Mary has an income of $50 . She spends her entire money either on burgers or on cookies. The price of a burger is $10, and the price of a cookie is $5 . Which of the following consumption bundles can Mary afford, given her income?
a. 5 burgers and 2 cookies b. 3 burgers and 4 cookies c. 3 burgers and 6 cookies d. 4 burgers and 3 cookies
Firms will borrow to finance capital expansion until the MRP of the investment equals the
A. MRP of labor. B. marginal cost of the finished good. C. marginal physical product of capital. D. interest payment charged for borrowing.