Chapter 13: Supply Side Fiscal Policy (page 264)
How are supply-side policies implemented and what types of supply-side policies are used?
Reduction of taxation
Interventionist
Non-Interventionist
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What is the relationship between the multiplier and the AD component of government spending?
Assume that a hypothetical economy with an MPC of .8 is experiencing a severe recession. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? Determine one possible combination of government spending increases and tax decreases that would accomplish the same goal.
Why might economists be quite concerned if the annual interest payments on the US public debt sharply increase as a percentage of GDP?
Trace the cause-and-effect chain through which financing and refinancing of the public debt might affect real interest rates, private investment, the capital stock, and economic growth. How might investment in public capital and public-private complementarities alter the outcome of the cause-effect chain?
The economy is in a recession. A congresswoman suggests increasing spending to stimulate aggregate demand and raising taxes simultaneously to pay for the increased spending. Her suggestion to combine higher government expenditures with higher taxes is
the worst possible combination of tax and expenditure changes.
the best possible combination of tax and expenditure changes.
a mediocre and contradictory combination of tax and expenditure changes.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
