Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134078809
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 12, Problem 2.6P
Sub part (a):
To determine
The effects of the discount rate on aggregative
Sub part (b):
To determine
The effects of increasing price level on aggregative demand.
Sub part (c):
To determine
The effects of income tax on aggregative demand.
Sub part (d):
To determine
The effects of investment spending on aggregative demand.
Sub part (e):
To determine
The effects of inflation rates on aggregative demand.
Sub part (f):
To determine
The effects of government purchases on the aggregative demand.
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Students have asked these similar questions
If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur?
A. Aggregate demand will be unchanged.
B. Aggregate demand will increase.
C. Interest rates will decrease.
D. The money supply will decrease.
Draw a graph, using the Aggregate Demand – Aggregate Supply curves, the result of a tax increase and cuts in federal expenditures during a period of inflation. Label all axes and curves and show which curve shifts and indicate the new equilibrium. As well as explain your graph in words.
Examine the following policies and determine which would decrease the level of aggregate demand.
Group of answer choices
A. Decreasing in government spending and decreasing taxes
B. Increasing investment and increasing government spending
C. Decreasing in government spending and increasing in taxes
D. Increasing consumption and decreasing taxes
Chapter 12 Solutions
Principles of Macroeconomics (12th Edition)
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Similar questions
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- How does increased government spending affect the aggregate demand curve?arrow_forwardWhich of the following is not an example of government spending hike that will increase aggregate demand? Answers: A. Unemployment compensation. B. Government purchase of new military jet fighters. C. The construction of a new highway. D. Government purchase of new health care plan for retirees.arrow_forwardThe graphs illustrate an initial equilibrium for the economy. Suppose that the government increases spending. Use the graphs to show the new positions of aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS) in both the short run and the long run, as well as the short‑run and long‑run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Adjust the graph. explain the second image as well and which is right.arrow_forward
- A change in any factor that influences our planned expenditure other than the price level, brings a change in aggregate demand. One of these factors is fiscal and monetary policy.” In terms of the statement above, assess how fiscal and monetary policy influences aggregate expenditure in an economy. Use appropriate diagrams to motivate your answer.arrow_forwardExplain what will happen as a result of the following events. In each case, draw an aggregate demand and short-run aggregate supply diagram showing the initial equilibrium output level (YO) and price level (PO). Show any changes, indicate the final equilibrium output level and price level and explain briefly. a. The economy is in a recession. An increase in government purchases occurs. The Fed tries to maintain the interest rate. b. The economy is operating near full capacity. Now environmental pollution standards are tightened substantially.arrow_forwardWhat kind of change would happen to aggregate demand, aggregate supply, and real GDP. if foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.arrow_forward
- I don't quite understand what is asking of the change that will occur in the long runarrow_forwardIf the economy experiences inflation and economic growth, this means that aggregate demand grows by more than aggregate supply. True or Falsearrow_forwarda) Which of the following shifts aggregate demand to the right? Group of answer choices Congress reduces purchases of new weapons systems. The Fed buys bonds in the open market. The price level falls. Net exports fall. b)Aggregate demand shifts left if Group of answer choices government purchases increase and shifts left if stock prices rise. government purchases increase and shifts left if stock prices fall. government purchases decrease and shifts left if stock prices rise. government purchases decrease and shifts left is stock prices fall.arrow_forward
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