Question

12. An aide to a U.S. Congressman computes the effect on aggregate demand of a $20...

12. An aide to a U.S. Congressman computes the effect on aggregate demand of a $20 billion tax cut. The actual increase in aggregate demand is less than the aide expected. Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

A. The actual MPC was larger than the MPC the aide used to compute the multiplier.

B. The aide thought the tax cut would be permanent, but the actual tax cut was temporary.

C. The increase in income shifted money demand less than the aide had anticipated.

D. The increase in income resulted in investment rising more than the aide had anticipated.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
Permanent tax cuts make the aggregate demand decrease more than do temporary tax cuts decrease not...
Permanent tax cuts make the aggregate demand decrease more than do temporary tax cuts decrease not as much as do temporary tax cuts. increase more do temporary tax cuts. increase not as much as do temporary tax cuts.
Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion....
Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 8 and the tax multiplier is 2. Economist B believes that the government spending multiplier is 4 and the tax multiplier is 8. Compute the...
Consider a hypothetical economy in which households spend $0.50 of each additional dollar of their after-tax...
Consider a hypothetical economy in which households spend $0.50 of each additional dollar of their after-tax income. The expenditure multiplier for this economy is___. Suppose that this economy is experiencing a recession. The government would like to stimulate aggregate demand and is deciding whether it should increase its spending by $1 billion or reduce income tax by $1 billion. Assume other things remain constant, and the marginal propensity to consume remains at 0.5. Before any multiplier effect takes place, a...
QUESTION 56 The multiplier effect states that there are additional shifts in aggregate demand from fiscal...
QUESTION 56 The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it a. reduces investment and thereby increases consumer spending. b. increases the money supply and thereby reduces interest rates. c. decreases income and thereby increases consumer spending. d. increases income and thereby increases consumer spending. 1 points    QUESTION 57 At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had...
If investment spending increases by $80 mill., the multiplier effect suggests that the Aggregate Demand curve...
If investment spending increases by $80 mill., the multiplier effect suggests that the Aggregate Demand curve will shift out by more than $80 mill., because: Question 3 options: when some builders see that others are building, they want to build, too. when investments increase, the government will increase spending to support them. an increase in investment spending will lead to income for workers who will spend part of it, so spending leads to income which leads to more spending. an...
If authorities believe that the natural rate of unemployment is lower than it actually is and...
If authorities believe that the natural rate of unemployment is lower than it actually is and pursue fiscal policies to move economic output to what they believe full employment to be, then which of the following is most likely to occur in the long run? a. An increase in the unemployment rate. b. A recession. c. A depression. d. An increase in the inflation rate Suppose an economy is producing at its potential output. The rate of unemployment corresponding to...
1.            The law of demand states that: a)            There is a direct or positive relationship between...
1.            The law of demand states that: a)            There is a direct or positive relationship between the price of a commodity and the quantity demanded. b)            The quantity demanded will be higher the lower is its price. c)            The quantity demanded will be lower the lower is its price. d)            The quantity demanded will be higher the higher is its price. 2.            The law of supply states that: a)            There is a direct or positive relationship between the quantity supplied...
5. In the market for loanable funds, what can cause a rise in interest rates? supply...
5. In the market for loanable funds, what can cause a rise in interest rates? supply shifting right and demand shifting right demand shifting right only supply shifting left and demand shifting right supply shifting right only 6. Which of these is an example of money being used as a store of value? A restaurant sells a large ice cream sundae and charges the customer's debit card. A customer receives $3.05 in change and returns the next day to make...
1. All of the following programs are considered mandatory spending EXCEPT: interest on national debt. Medicare....
1. All of the following programs are considered mandatory spending EXCEPT: interest on national debt. Medicare. Social Security. national defense. 2. What did Arthur Laffer suggest President Reagan do in the 1980s? increase welfare benefits increase corporate taxes increase income taxes decrease income taxes 3. A type of money made from a substance that is also valuable is called: economic money. fiat money. commodity money. metallic money. 4. What are the two common measures of the money supply in use...
6. A persistent increase in the actual growth rate of real GDP in excess of the...
6. A persistent increase in the actual growth rate of real GDP in excess of the growth rate of potential real GDP likely will most result eventually in: (a) accelerating inflation; (b) a recession; (c) stagflation (rising inflation and falling real economic growth); (d) a looser monetary policy from the Federal Reserve. 7. For the most part, rising U.S. inflation is associated with: (a) a much stronger U.S. dollar in foreign exchange markets; (b) growth in aggregate demand at a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT