Consider two policies: a tax cut that will last for only one year and a tax cut that is expected to be permanent.   True or False: A tax cut that is expected to be permanent will have a greater impact on aggregate demand than a tax cut that will last for only one year.   True   False

Q: f the Mexican government pursues expansionary fiscal policy in response to the recession, what will…

A: Aggregate Demand:Aggregate Demand is when the total number of consumers have the desire to buy…

Q: Suppose economists observe that an increase in government spending of $11 billion raises the total…

A: Crowding Out Effect:In economics, the Crowding Out Effect means the situationwhere increased…

Q: real GDP = (Change in Taxes) X Change in equilibrium (Tax Multiplier) Change in equilibrium real GDP…

A: Initial change in the tax or investment causes multiple change in final income. The value of…

Q: The Japanese government decides to stimulate the economy by increasing direct spending by $70…

A: Given,Increase in government spending: △G=$70 billionFinal change in real GDP: △Y=$280 billion The…

Q: I need help with these two. True or false questions.  Fiscal policy is the set of policies that…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: If the MPC is 0.80 and there are no crowding-out or accelerator effects, then an initial increase in…

A: A multiplier effect results in increase in the level of equilibrium national income to be greater…

Q: If the Keynesian consumption function were C = 2,000 + 0.75YD , what would the value of the tax…

A: Consumption function is the sum of autonomous and induced consumption. The slope of the Consumption…

Q: Suppose the economy is in equilibrium at point B which is below the full-employment output of point…

A: Macroeconomics examines the working, composition, and dynamics of an economy. AD/AS model is used…

Q: Suppose the economy has a recessionary gap. By using an expansionary fiscal policy, the Federal…

A: Government can able to control the fluctuation in an economy by using expansionary and…

Q: According to the supply side fiscal policy, increasing tax rates on wages will: Group of answer…

A: When there is increase in wages, there is increase in cost of production.

Q: Consider an economy that is operating below the full-employment level of real GDP. What would be the…

A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…

Q: According to the classical macroeconomic model, expansionary fiscal policy has an inflationary…

A: Fiscal Policy is a policy by which the governments adjusts its amount of expenditure and taxes…

Q: The federal government is considering some fiscal policy alternatives. Will its choice between the…

A: 1. Military procurement as well as scientific research is the two areas where the government makes…

Q: Permanent Income Hypothesis to discuss why tax rebates may have no effects on aggregate demand…

A: Tax rebates are monetary incentives that governments offer, usually in the form of refunds or lower…

Q: Expansionary fiscal policy will: a shift the aggregate demand curve left. b shift the aggregate…

A: Fiscal Policy refers to the policy that the government undertakes to either increase economic growth…

Q: In each of the following cases, determine whether the policy is an expansionary or contractionary…

A: In the Keynesian macroeconomic theory, government plays a very important role in stabilizing the…

Q: You are advising the Bank of Canada and the Federal Government. The economy is in a state of…

A: The monetary policies are those policies which are enacted by the central bank of a country to…

Q: If the MPC = .8, a $200 tax cut causes the Aggregate Demand Curve to shift to the right by -$800…

A: Tax multiplier: - it is a fraction that shows the magnitude of the change in national income due to…

Q: An economy is operating with an output that is $600 billion dollars above its natural rate of $2400…

A: The marginal propensity to consume is a metric that quantifies induced consumption, the concept…

Q: Suppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The…

A: GDP: It means the monetray value of finished goods and services that are produced in the country.

Q: Assuming the economy is in long run and the govt implemnents a tax cut of $420 Billion, there is no…

A: Here, it is given that the government implements a tax cut of $420 billion in the economy when…

Q: If the MPC in an economy is 0.7, the government could shift the aggregate demand curve rightward by…

A: The marginal propensity to consume (MPC) is defined as the proportion of an aggregate raise in pay…

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75  Tax multiplier = (-MPC/1-MPC) Tax multiplier= (-0.75/1-0.75)Tax multiplier=…

Q: 36) An automatic fiscal stabiliser is      A) a monetary or fiscal policy that aims to smooth out…

A: The business cycle occurs when there is ups and downs in the gross domestic product along its trend…

Q: Assume that an economy with an MPC of 0.8 is experiencing a recessionary gap of $25 billion. The…

A: The marginal propensity to consume (MPC) is a crucial idea in macroeconomics because it assesses an…

Q: Which of these statements about automatic stabilisers is true? a) They eliminate the fluctuations…

A: An economy is said to be operating free when there is no government that does not intervene in the…

Q: Suppose that Congress and President decide on lowering taxes and increasing government spending in…

A: Macroeconomics analyzes the economy as a whole. Several macroeconomic policies are discussed in…

Q: Suppose you are an economic adviser to the president, and the economy needs a real GDP increase of…

A: $280 billion.Explanation:To calculate the amount Congress must increase government spending by to…

Q: Suppose the aggregate expenditure (AE) schedule in an economy is given by the equation AE = 1,000 +…

A: Aggregate expenditure (AE) is a measure of national income. It is the total amount of spending in…

Q: If the marginal propensity to consume (MPC) is 0.8, the government purchases multiplier will be that…

A: GDP is the sum of consumption, investment, government spending and net exports in an open economy.…

Q: pose actual real GDP is $7.54 trillion, potential real GDP is $12.32 trillion, and the marginal…

A: The output gap is the difference between Actual output and potential output. If economy is below its…

Q: From an initial long-run equilibrium, if aggregate demand grows slower than long-run aggregate…

A: Aggregate demand is the sum of Consumption, Investment, government spending and net exports. Short…

Q: An economy is operating with an output of $500 billion below its natural level, and fiscal…

A: Given that the economy is operating below the natural level, it is informed in the question is that…

Q: Suppose the economy begins at full employment. Label this starting point as point "1." Then,…

A: Aggregate supply: The aggregate supply or AS is a macroeconomic concept. The total amount of…

Q: This exercise points to a clear policy dilemma. A fiscal contraction may have desirable long-run…

A: Contractionary fiscal policy is a type of economic policy that is used to slow down an economy that…

Q: Which one of the following propositions would be consistent with a supply-side view of fiscal…

A: Macroeconomics analyzes the economy as a whole. It studies aggregate economic concepts such as…