Homework Answers
Answer
Option b
The decrease in the tax rate increases the disposable income which increases consumption as
consumption =autonomus consumption + marginal propensity to consume * disposable income
Disposable income =income - taxes
So the increase in consumption increases GDP as
GDP=consumption + investment + government spending + net export
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unemployment rate.
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price level.
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a. Which of the following events would likely cause the decrease
in aggregate demand?
Personal consumption falls as workers become concerned about
future employment prospects.
Imports decrease due to increased foreign prices.
Gross investment increases as capital units become fully
utilized.
b. A decrease in aggregate demand is of policy concern due to
the increase in the:
unemployment rate.
productivity of workers.
price level.
c. Which policy action should the federal government enact?
Increase personal income tax rates
Decrease real...
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