The federal government implements an expansionary fiscal policy of increased spending and decreased taxes. Policy advisors predict output will increase 4% but are surprised when only 3% growth occurs. What might account for the fact that GDP increased by less than the multiplier predicted? a. Policy advisors' calculation of MPS was too high b. The aggregate supply curve was perfectly elastic c. Foreign purchases of domestic goods was greater than expected due to a devalued currency d. Consumption increases more than expected because of the decrease in taxes e. Investment decreased due to rising interest rates
The federal government implements an expansionary fiscal policy of increased spending and decreased taxes. Policy advisors predict output will increase 4% but are surprised when only 3% growth occurs. What might account for the fact that GDP increased by less than the multiplier predicted? a. Policy advisors' calculation of MPS was too high b. The aggregate supply curve was perfectly elastic c. Foreign purchases of domestic goods was greater than expected due to a devalued currency d. Consumption increases more than expected because of the decrease in taxes e. Investment decreased due to rising interest rates
Survey of Economics (MindTap Course List)
9th Edition
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Irvin B. Tucker
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 19SQ
Related questions
Question
The federal government implements an expansionary fiscal policy of increased spending and decreased taxes. Policy advisors predict output will increase 4% but are surprised when only 3% growth occurs. What might account for the fact that
a. Policy advisors' calculation of MPS was too high
b. The
c. Foreign purchases of domestic goods was greater than expected due to a devalued currency
d. Consumption increases more than expected because of the decrease in taxes
e. Investment decreased due to rising interest rates
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Survey of Economics (MindTap Course List)
Economics
ISBN:
9781305260948
Author:
Irvin B. Tucker
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Survey of Economics (MindTap Course List)
Economics
ISBN:
9781305260948
Author:
Irvin B. Tucker
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning