Question

An increase in government purchases, a decrease in net taxes, or some combination of the two...

An increase in government purchases, a decrease in net taxes, or some combination of the two is designed to: Select one: a. close a recessionary gap b. reduce unemployment c. shift the economy's aggregate demand curve outward d. all of the above

Homework Answers

Answer #1

Both increase in government spending and decrease in taxes (or there combination) will shift IS curve to the right which will result in Aggregate demand(AD) curve to shift outward. Recessionary gap occurs when aggregate equilibrium output is less than potential output and in order to close that we have to increase equilibrium output. This rightward shift in AD curve will result in increase in output and thus they can be designed to reduce recessionary gap. As discussed above they result in AD curve to shift outward which will. result in increase in output. As output increases, economy have to hire more labor and thus unemployment decrease. So, They can be used to reduce unemployment. Thus all of the above are correct.

Hence, the correct answer is (d) all of the above.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or...
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate: A) demand to shift rightward. B)demand to shift leftward. C)supply to shift rightward. D)supply to shift leftward. E) supply and aggregate demand to both shift equally inward. 2. A decrease in aggregate supply can result in: A) Unemployment B) demand- pull inflation C) prosperity D) cost- push inflation E) a recession 3.A...
1) Open market purchase will result in: increase in bank reserves and a decrease in the...
1) Open market purchase will result in: increase in bank reserves and a decrease in the federal funds rate. increase in bank reserves and an increase in the federal funds rate. decrease in bank reserves and a decrease in the federal funds rate. decrease in bank reserves and an increase in the federal funds rate. 2) An increase in government expenditure would shift the: A) aggregate demand curve rightward. aggregate demand curve leftward. aggregate supply curve rightward. aggregate supply curve...
5. Government purchases of goods and services differ from changes in taxes and transfer payments in...
5. Government purchases of goods and services differ from changes in taxes and transfer payments in that: A) the former is a type of fiscal policy, while the latter is a type of monetary policy. B) the former is a type of monetary policy, while the latter is a type of fiscal policy. C) the former influences aggregate demand directly, while the latter influences aggregate demand indirectly. D) the former influences aggregate demand indirectly, while the latter influences aggregate demand...
A decrease in tax rates has no effect on the AD curve. causes the AD curve...
A decrease in tax rates has no effect on the AD curve. causes the AD curve to shift left. causes the AD curve to shift right. has only a short-term effect on real GDP. usually leads to a reduction in potential GDP. 2. To reduce the size of economic fluctuations, the government could make fewer permanent changes in government spending. change government purchases often to encourage a shift of the aggregate demand curve. increase spending during a recession and decrease...
Which government action will shift the aggregate demand left? Select one: a. a decrease in taxes...
Which government action will shift the aggregate demand left? Select one: a. a decrease in taxes b. repealing an import tariff c. signing a free trade agreement d. a decrease in the money supply
If the government wants to increase the economy’s GDP levels, it could     A) decrease government expenditures....
If the government wants to increase the economy’s GDP levels, it could     A) decrease government expenditures. B) increase taxes. C) decrease government expenditures and increase taxes. D) increase government expenditures. E) None of the above. If the government wants to decrease the economy’s GDP levels, it could A) increase taxes.                                                     B) increase government expenditures. C) wait for inflationary pressure to come.                 D) decrease government expenditures. E) None of the above. Contractionary fiscal policy is designed to    A) raise the price level only.                                     B)...
Which combination of policies would be the most contractionary? Select one: a. a decrease in government...
Which combination of policies would be the most contractionary? Select one: a. a decrease in government spending and an increase in taxes b. an increase in government spending and a decrease in taxes c. a decrease in both government spending and taxes d. an increase in both government spending and taxes
Which combination of policies would be the most contractionary? Select one: a. a decrease in government...
Which combination of policies would be the most contractionary? Select one: a. a decrease in government spending and an increase in taxes b. an increase in government spending and a decrease in taxes c. a decrease in both government spending and taxes d. an increase in both government spending and taxes
Which combination of policies would be the most contractionary? Select one: a. a decrease in government...
Which combination of policies would be the most contractionary? Select one: a. a decrease in government spending and an increase in taxes b. an increase in government spending and a decrease in taxes c. a decrease in both government spending and taxes d. an increase in both government spending and taxes
If there is a sudden increase in the demand for money, what could the Fed do...
If there is a sudden increase in the demand for money, what could the Fed do to hold interest rates steady at their current levels? Select one: a. Cut taxes. b. Sell government securities. c. Raise the discount rate. d. Raise the required reserve ratio. e. None of the above is correct . Which of the following sequence of events follows a decrease in the discount rate? Select one: a. r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↑ b. r↑ ⇒...