MACROECONOMICS W/SAPLING PLUS
10th Edition
ISBN: 9781319258900
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 19, Problem 6QQ
To determine
The impact of tax cut on investment.
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Students have asked these similar questions
In what direction will each of the following occurrences shift the investment demand curve, other things equal?
a. An increase in unused production capacity occurs.
b. Business taxes decline.
c. The cost of equipment fall.
d. Widespread pessimism arises about future business conditions and sales revenue.
e. A major new technological breakthrough creates prospects for a wide range of profitable new products.
Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output.
an increase; an increase
a decrease; no change
a decrease; a decrease
None of the listed options is correct.
no change; a decrease
What are the likely consequences of a
government implementing a policy of
austerity during a period of economic
recession?
A. It would stimulate economic growth by
increasing consumer confidence.
B. It would lead to a decrease in the
unemployment rate.
C. It would potentially deepen the recession
by reducing overall demand.
D. It would have no effect on the economy's
performance.
Chapter 19 Solutions
MACROECONOMICS W/SAPLING PLUS
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- Limit your answers within 5 pages. Hard-copy, no email attachments. 1 PART - I 1.1 Multiple Choice Questions Q1 The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving: A) rises by $100 billion. B) rises by 860 billion. C) falls by $60 billion. D) falls by $100 billion. Q2 Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by percent. A) 10 percent. B) 20 percent. C) 30 percent. D) 40 percent. Assets Reserves Loans Securities Bank Balance Sheet $ 10,000 $ 100,000 $ 40,000 1 Liabilities and Net Worth Deposits Debt Equity $ 100,000 $ 20,000 $ 30,000arrow_forwardWhen the value of average propensity to save is negative, then the value of marginal propensity to save will also be negative.arrow_forwardAssume the marginal propensity to consume is 0.8. To offset a fall in income of 1,000 the government should a. raise taxes by $250. b. increase government spending and taxes by 1,000. c. increase taxes by $200. d. cut taxes by $200.arrow_forward
- Consumption and Saving- End of Chapter Problem Which one of the following reasons makes it easier to forecast the impact of an income change on consumption for hand-to-mouth consumers than for consumption smoothers? It is easier because hand-to-mouth consumers only spend their permanent income. hand-to-mouth consumers save a large portion of their income. the marginal propensity to consume is 1 for consumption smoothers. hand-to-mouth consumers spend their entire income as they earn it.arrow_forwardA decrease in personal income taxes will increase employment if the economy is operating in? A. Region 3 of AS function. B. Both region 1 and region 3 of the AS function. C. Neither region 1 nor region 2 of the AS function. D. Region 1 of the AS function. E. None of the above.arrow_forwardWhich of the following would not cause shift in the investment demand curve as the above graph shows? Select one: a. Business taxes b. Expectations c. Changes in real interest rates d. Acquisition, maintenance, and operating costs e. Technological changearrow_forward
- The marginal propensity to consume for this economy is …………. if income rises from $9000 to $10000 and consumption is rises from $750 to $1500 0.650. 0.750. 0.650 or 0.664, depending on whether income is $10,000 or $11,000. 0.800.arrow_forwardA drop in the price level will have what effect in the aggregate demand model and the income-expenditure model?A.decreases aggregate demand and planned expenditures.B.increases aggregate demand, but decreases planned expenditures.C.decreases aggregate quantity demanded, but increases planned expenditures.D.increases aggregate quantity demanded and planned expenditures.arrow_forwardA budget expresses management's objectives and goals in financial terms. It can be used for all of the following except: a. to establish standards or targets for dollar expenditures. b. to provide a standard against which expenditures can bemeasured. c. to establish flexible spending parameters for controllable expenses. d. to establish limits for expenditure, and thus to restrict the amounts that can be spent for particular purposes..arrow_forward
- b. From the Intertemporal Choice Model, many theories (non-Keynesian theories of Consumption) came into being. Using graphical and mathematical expressions, compare and contrast the following theories on consumption behaviours: i. Milton Friedman: Permanent-Income Hypothesis Robert Hall: Random Walk Hypothesis Franco Modigliani: Life-Cycle Hypothesis ii. iii.arrow_forward1.11 If desired investment exceeds actual investment, then…a) The economy is in a recession.b) Inventories are less than the desired level.c) Inventories are accumulating beyond the desired levels.d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women’s empowerment movement eyes 40% of government spending accreditation…Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa’s most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women’s economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business.” Source: https://www.news24.com/citypress/news/womens-empowerment-movement-eyes-40-of-government-spending-20210819The above decision by the South African government is an example…arrow_forwardIn order to financially stimulate the nation, the Federal government injected $900 billion dollars into the economy. However, the results were less than spectacular. One reason could have been a failure to understand the marginal propensity to consume. Assume the marginal propensity to consume (MPC) was only 0.4. How much of that $900 billion went to increased consumption? Where did the rest of the money go? Increased consumption: Where did the rest go? Using MPC = 0.4, what is the spending multiplier (the actual numerical value please): What was the overall change in income as a result of the stimulus package after the multiplier completely works its way through the economy?arrow_forward
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