(03.08 MC) What will be impact of an income tax increase on an economy's consumption spending, real output, and unemployment in the short run? O Consumption will decrease, real output will decrease, and unemployment will increase. O Consumption will increase, real output will increase, and unemployment will decrease. O Consumption will increase, real output will decrease, and unemployment will increase. Consumption will increase, real output will increase, and unemployment will decrease. O Consumption will decrease, real output will decrease, and unemployment will decrease.

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(Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion. 0.9 0.8 0.75 0.6

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Quèstion 12 AD2 AD1 AD3 Real Domestic Product, GDP Refer to the graph. Which of the following changes will shift AD1 to AD2? O A. an increase in the value of the dollar relative to other currencies. O B. an increase in real interest rates. OC a shrinkage in the value of stocks and other financial assets. O D. a cut in personal and business taxes. Price Level

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increase in aggregate demand. Question 10 When the interest rate increases, 1. The domestic currency depreciates and net exports increase. II. The return to saving increases and households save a higher fraction of income. III. Firms are able to finance more capital purchases and investment increases. IV. Aggregate demand decreases. # 3 O I, II and IV O I, II, III and IV O II and IV OI and IV 80 F3 S 4 F4 % 5 F5 No new data to save. Last checked at 11:21pm Sub. < (O 6 F6 & 7 F7 * 00 8 DII FB ( F9

Quèstion 1 In an open mixed economy, the inflationary expenditure gap may be described as the O A. excess of Sa + M+T over lg + X+ G at the full-employment GDP. O B. excess of GDP over Ca + lg +Xn + G at the full-employment output. OC excess of Ca + Ig + Xn + G at the full-employment GDP. O D. extra consumption that occurs when investment increases in a full-employment economy.

4. Study Questions and Problems #4 Real GDP (Y) and aggregate expenditures (AE) are shown for an economy in the first two columns of the following table. Suppose that economic forecasters predict government spending to increase in the near future from G=$1 trillion to G=$1.25 trillion. Recalculate the value of aggregate expenditures given the new value of G=$1.25 trillion. Enter those values to the second decimal place in the third column of the table. Real GDP (Y) (Trillions of dollars per year) 0 1 2 3 4 5 6 7 8 9 10 G=$1 trillion (Trillions of dollars per year) 1.25 2.00 2.75 3.50 4.25 Aggregate Expenditures 5.00 5.75 6.50 7.25 8.00 8.75 G=$1.25 trillion (Trillions of dollars per year) 1.56 2.5 3.44 4.38 5.31 6.25 7.19 8.13 9.06 10 10.94 The black line on the following graph represents the 45-degree line where real GDP equals aggregate expenditures. Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy when G-$1.25 trillion. Line segments will…