Question

how government can reduce the consumption expenditure? How decrease in consumption expenditure will affect economy with...

how government can reduce the consumption expenditure? How decrease in consumption expenditure will affect economy with inflationary gap?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

government can reduce consumption expenditure by increasing taxes and decreasing transfers. these transfers are generally the welfare transfers the such as unemployment insurance or social security benefits. When taxes are increased disposable income is reduced and this reduces consumption expenditure. because consumption expenditure is a part of aggregate demand its reduction will reduce aggregate demand. As a result it is going to decrease the inflationary gap.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure...
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000. If the population of the economy is 200, the per capita national income is: A. $10. B. $17. C. $35. D. $50. In a closed economy without the government, income equals: A. aggregate consumption. B. aggregate savings. C. aggregate savings plus aggregate investment. D. aggregate savings plus aggregate consumption. The savings rate designates: A. the fraction of income that households save. B....
Explain how an increase in government expenditure can affect the goods market and money market by...
Explain how an increase in government expenditure can affect the goods market and money market by taking the link between the two markets into account.
If there is a decrease in autonomous consumption, how will that affect the IS, MP and...
If there is a decrease in autonomous consumption, how will that affect the IS, MP and AD curves? What monetary policy can be used to keep the AD curve from shifting?
An open economy is currently in an inflationary gap. In attempt to reduce the inflationary pressure,...
An open economy is currently in an inflationary gap. In attempt to reduce the inflationary pressure, the central bank decides to adjust the target for overnight rate to close the inflationary gap. What should the central bank do?. Also, describe how the monetary transmission mechanism works for the proposed change in monetary policy.
how would an increase in the income tax affect the Keynesian government expenditure multiplier?
how would an increase in the income tax affect the Keynesian government expenditure multiplier?
Suppose that a country's economy is operating at an unemployment rate 6% higher than its natural...
Suppose that a country's economy is operating at an unemployment rate 6% higher than its natural rate of unemployment. Then a(n) __________ exists and government should _________. inflationary gap; increase spending inflationary gap; decrease spending recessionary gap; increase spending recessionary gap; decrease spending
The economy is in a boom and the inflationary gap is large. Describe the discretionary and...
The economy is in a boom and the inflationary gap is large. Describe the discretionary and automatic fiscal policy actions that might occur. Discretionary fiscal policy that might occur is​ ______.    Automatic fiscal policy that might occur is​ ______.        A. an increase in transfer payments and a fall in taxes with no interference by​ Parliament; an increase in government expenditure and a cut in taxes by a decision of Parliament B. a decrease in transfer payments and an increase in...
In an effort to reduce alcohol consumption, the government of economy XYZ is considering $1 tax...
In an effort to reduce alcohol consumption, the government of economy XYZ is considering $1 tax on each gallon of liquor sold (the tax is levied on producers). Suppose that the demand curve is QD = 500,000- 20000P (where QD is the number of gallons of liquor demanded and P is the price per gallon), and the supply curve for liquor is Qs = 30000P (where Qs is the number of gallons supplied). a. Calculate the before tax equilibrium price...
In a simple closed economy where there is no government and investment, the consumption function of...
In a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. What is the expenditure multiplier in this economy? Select one: a. 0.40 b. 1.66 c. 2.5 d. 0.60 e. None of the other four choices
n a simple closed economy where there is no government and investment, the consumption function of...
n a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. a. What is the consumption expenditure when income is equal to zero? b.  What is the break-even point Y? c. By how much will equilibrium income change due to the addition of investment?   d. Suppose, now our simple closed economy added an intended investment I=100, the consumption function of households is still...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT