Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971509
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 23, Problem 6CQQ
To determine
The argument in agreement to taxing consumption.
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Which of the following effects results from the change in the interest rate created by an increase in government spending?
a.
the investment accelerator and crowding out
b.
the investment accelerator but not crowding out
c.
crowding out but not the investment accelerator
d.
neither crowding out nor the investment accelerator
The classification of government spending as an investment or having an investment-effect depends on:
a. How the spending affects current consumption.
b. How the spending affects future productivity.
c. How the spending affects current stock prices.
d. How the spending affects future stock prices.
Explain, using appropriate diagrams, how a rise in the household saving rate cancause a fall in GDP, and how a fiscal stimulus might offset this.
Chapter 23 Solutions
Principles of Macroeconomics (MindTap Course List)
Ch. 23.1 - Prob. 1QQCh. 23.2 - Prob. 2QQCh. 23.3 - Prob. 3QQCh. 23.4 - Prob. 4QQCh. 23.5 - Prob. 5QQCh. 23.6 - Prob. 6QQCh. 23 - Prob. 1CQQCh. 23 - Prob. 2CQQCh. 23 - Prob. 3CQQCh. 23 - Prob. 4CQQ
Ch. 23 - Prob. 5CQQCh. 23 - Prob. 6CQQCh. 23 - Prob. 1QRCh. 23 - Prob. 2QRCh. 23 - Prob. 3QRCh. 23 - Prob. 4QRCh. 23 - Prob. 5QRCh. 23 - Prob. 6QRCh. 23 - Prob. 7QRCh. 23 - Prob. 8QRCh. 23 - Prob. 9QRCh. 23 - Prob. 10QRCh. 23 - Prob. 1PACh. 23 - Prob. 2PACh. 23 - Prob. 3PACh. 23 - Prob. 4PACh. 23 - Prob. 5PACh. 23 - Prob. 6PACh. 23 - Prob. 7PACh. 23 - Prob. 8PA
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- Eliminating double-taxation would likely a. raise saving and primarily benefit people with lower incomes. b. reduce saving and primarily benefit people with higher income. c. raise saving but primarily benefit people with higher incomes. d. reduce saving but primarily benefit people with lower incomes.arrow_forwarda. In which instance would "crowding out" likely become a concern? OA balanced budget law prevents the government from taking fiscal action during a recession. O Prior-year budget surpluses allow the government to use saved funds to reduce taxes. O In order to increase spending on infrastructure, the federal government decides to borrow funds. b. One result of "crowding out," due to fiscal action, is difficulty saving income for future purchases. O making economic investments. O purchasing stocks and other financial investments.arrow_forward7. Examine whether the following items are built-in stabilizers or discretionary changes. (a)Unemployment benefits (b)Tax cuts (c)An increase in government spending on road work (d)Progressive tax systemarrow_forward
- 20. If expansionary fiscal policy in the form of an increase in government spending causes offsetting in part the interest rates to rise, we would expect investment to increase in output. This offset is referred to as a. Increase; multiplier b. Decrease; crowding out c. Increase; crowding in d. Decrease; multiplierarrow_forward4. A country’s consumer spending is defined by the following equation:Consumer spending = 365 + 0.75 (Disposable Income)a. Draw a diagram to represent this equation. b. Assuming no government, what will the Marginal Propensity to Save (MPS) in this country.c. What will be Consumer spending if disposable income in this country is 1000? d. If suddenly this country’s wealth increases, how do you think the equation might change.Also show it in a diagram.arrow_forwardWhich of the following is an example of contractionary fiscal policy?A. Cutting spendingB. Reducing taxesC. Increasing spendingD. None of thesearrow_forward
- Which of the following is incorrect regarding tax revenues? a.they increase during recessions b.they increase during economic expansions c. they are a revenue source in the government's budget d. they change with changes in the tax ratearrow_forwardConsider an economy in which GDP is $30 billion. Tax revenue is $7 billion, consumption is $15 billion, and the government has a budget surplus of $2 billion. Show your work in each of the following questions. (a) What is the level of government spending?(b) What is private saving?arrow_forwardFiscal drag is where Select one: a.there is a lag in government spending having any effect. b.increases in nominal wages push taxpayers up tax brackets. c.increases in government spending hold back economic growth. d.taxpayers look for ways to avoid paying tax they perceive is unfair.arrow_forward
- Real government purchases may fall when the price level rises if which of the following is true? Group of answer choices A. Some parts of the government budget are fixed in nominal terms. B. All parts of the government budget are fixed in real terms. C. Governments always buy the same quantity of goods and services regardless of how much they cost. D. Governments prefer more expensive goods to less expensive goods because they create more jobs. Quantitative easing involves which of the following? Group of answer choices A. The use of open-market operations to increase the quantity of reserves held by the commercial banks B. The use of open-market operations to increase the quantity of reserves held by the Fed C. The reduction of reserves held by the commercial banks D. The reduction of the discount rate in order to stimulate lending by commercial banksarrow_forwardWhich of the following is not an automatic stabilizer? A. Unemployment compensation. B. Defense spending. C. Progressive income tax rates (that is, higher marginal tax rates that rise with income). D. All of the answers are automatic stabilizersarrow_forwardAn example of a fiscal policy designed to increase real GDP is a. a cut in taxes. b. an increase in taxes. c. a decrease in government expenditure. d. None of these answers is correct.arrow_forward
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