Suppose a country increases income taxes by $100 billion, and this leads to a decrease in consumption

Question:

Suppose a country increases income taxes by $100 billion, and this leads to a decrease in consumption spending of $90 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion.

a. In which direction will the aggregate demand curve shift and by how much?

b. Explain using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve. P-963

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Principles Of Macroeconomics

ISBN: 9780691170817

1st Edition

Authors: Libby Rittenberg, Timothy Tregarthen

See More Books

Question Posted: Nov 08, 2024 08:00 AM

See More Questions

4. Suppose a country's debt rises by 10% and its GDP rises by 12%. a. What happens to the debt-GDP ratio? b. Does the relative level of the initial values affect your answer? 7. Suppose a country...
7. If a bond is quoted in the newspaper at 88.75, the current price of a $1,000 face value bond is: (Points : 1) $75.00 $88.00 $88.75 $887.50 $1,000.00 11. Assume the beta for the stock market in...
4 Files 3:18 PM Fri May '13 Insert Draw Layout Review View Unit SMacroeconomic Policy Name: HR: FISCAL POLICY Use the space below to take notes during class. Disposable Income: How does a change in...
What type of isomers are exhibited by [Fe(en) 3 ]Cl 2 (en = ethane-1,2-diamine)? no isomers are possible. cis and trans isomers fac and mer isomers optical isomers
Develop a paper, evaluation on the Overview of Financial Statements using the following as guides: 1. Locate a financial statement (income, balance, statement of cash flow) for a company similar to...
The following information is available for Mandalay Company: Required(a) Determine the material price variance based on the quantity of materials purchased.(b) Determine the material quantity...
Suppose a country increases income taxes by $100 billion, and this leads to a decrease in consumption spending of $90 billion. Suppose the multiplier is 1.5 and the economys real GDP is $5,000...
For this exercise, your client, Bright IDEAS Inc., has provided you with a listing of sales invoices. To test whether the client appears to have a receivables collectability problem, the auditor must...
The highest level of social performance comes through _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ being profitable contributing to the community none of the other answers are correct obeying the law
Suppose a country decreases income taxes by $100 billion, and this leads to an increase in consumption spending of $90 billion. Suppose the multiplier is 1.5 and the economys real GDP is $5,000...
Suppose a country institutes an investment tax credit, and this leads to an increase in investment spending of $100 billion. Suppose the multiplier is 1.5 and the economys real GDP is $5,000 billion....
3. Identify component parts of the communications mix
Easy Weight Loss Co. offers personal weight reduction consulting services to individuals. After all the accounts have been closed on November 30, 20Y7, the end of the fiscal year, the balances of...
a) Can a business earn a Gross Profit but still report a Net Loss? Explain your answer. Hint: You'll need to carefully review the structure of the multi-step Income Statement prior to answering. Make...
Marigold Corporation has been authorized to issue 21,000 shares of $100 par value, 10%, preferred stock and 1,020,000 shares of no-par common stock. The corporation assigned a $2.50 stated value to...
What should the Response Plan do? A. Note all benefits achieved in the project along with lessons learned B. Identify leading indicators in order to intervene and take remedial action C. Take over...
To which YAML value does the following JSON data convert? {"inventory": ["csr1kv1", "ios-xe"]} a. inventory: - csr1kv1 -ios-xe b. inventory: csr1kv1: ios-xe c. - inventory - csr1kv1 -ios-xe d....
The Nova laser at Lawrence Livermore National Laboratory in California is used in studies of initiating controlled nuclear fusion (Section 45.4). It can deliver a power of 1.60 X 1013 W over a time...
Assume you are the accountant for Catalina Industries. John Catalina, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 20X1, and asks you...

Suppose a country increases income taxes by $100 billion, and this leads to a decrease in consumption

Question:

Step by Step Answer:

Principles Of Macroeconomics

Students also viewed these Business questions