Question

22.       Why is the multiplier for a change in taxes smaller than for a change in spending?

a. A change in taxes has no effect on aggregate demand, only on aggregate supply.

            b. A change in taxes directly affects government spending as well, lowering the multiplier.

            c. A change in taxes affects spending directly, but at a slower rate than spending does.

            d. A change in taxes affects disposable income and then consumption rather than spending directly.

            e. All of the above are correct.

23.       If the U.S. reduced government spending and taxes by equal amounts, what would happen to equilibrium GDP?

            a. It would remain unchanged.

            b. It would fall.

            c. It would rise.

            d. Uncertain, economic theory has no answer to this question.

24.       The balanced‑budget multiplier suggests that when taxes and government spending are     increased by the same amount, there will be:

a. no change in the equilibrium level of GDP.

b. a decrease in the equilibrium level of GDP.

c. an increase in the equilibrium level of GDP.

d. first an increase and then a decrease in the equilibrium level of GDP.

26.       The four components of planned aggregate expenditures are

1. Consumption, investment, inventories, and government purchases.
2. Consumption, planned investment, unplanned changes in inventory, and exports.
3. Consumption, investment, government purchases, and net exports.
4. Consumption, investment, exports and imports.

27.       The aggregate demand (AD) curve slopes downward indicating that

a. an increase in the general price level will reduce the aggregate quantity of goods and services demanded.

b. an increase in the general price level will increase the aggregate quantity of goods and services demanded.

c. a change in the interest rate will alter the aggregate quantity of goods and services demanded.

            d. consumers substitute between domestic-made goods as their prices change.

Answer 1

Croor eas multiple saa multiple Aus is D. = TMPC compe Tarife Balanced Budget multpli al I in taky with & in G will lead to decrease in output. pina 4 taxes, will increase Y. wo PAE = C4 I thinx 2 AD slops dowowed shows an inverse erebahan blow price & qy demanded.