How does a tax cut affect consumer spending?
- For instance, if consumers increase spending prior to a tax cut (permanent or transitory), the saving rate will fall in advance of the effective date of the cut. By the time of the effective date, spending may show little or no further increase, but after-tax income will rise, boosting the sav- ing rate.
How will a decrease in personal income taxes and an increase in government spending affect consumer spending and unemployment in the short-run?
How will a decrease in personal income taxes and an increase in government spending affect consumer spending and unemployment in the short-run? Prices are rigid downward and decreases in aggregate demand will lead to an increase in unemployment.
Which of the following explain the reason for the up sloping aggregate supply curve in the short-run?
In the short-run, the aggregate supply is graphed as an upward sloping curve. The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises. In the short-run, firms have one fixed factor of production (usually capital ).
What is one result of a decrease in aggregate demand?
What is one result of a decrease in aggregate demand? Multiple choice question. A leftward shift in the aggregate curve leads to cost-push inflation.
Which of the following are the four components or determinants of aggregate demand quizlet?
The four determinants of aggregate demand are consumer spending, ____ spending, government spending and net export spending. Identify factors other than the price level, that would cause net exports to change. The aggregate demand curve will shift to the right when consumers expect their future incomes to ____.
How will a decrease in personal income taxes and an increase in government?
Expansionary. The decrease in personal income taxes increases disposable income and thus increases consumption spending. The business tax cut increases investment spending, and the increase in government spending increases government demand.
Which of these would most likely result in a decrease in consumer spending?
Which of these actions would most likely result in a decrease in consumer spending? Increasing income taxes. If a government sets a maximum price for a good or service, what does it create?
Which of the following would decrease short run aggregate supply only?
A decrease in the price level will decrease the short-run aggregate supply only.
Why does a reduction in aggregate demand in the actual economy reduce real output rather than the price level?
A reduction in aggregate demand causes a decline in real output rather than the price level because prices are inflexible downward (“sticky”).
Which of the following helps to explain why the aggregate demand curve slopes downward?
Which of the following explain why the aggregate demand curve slopes downward? The real-balances effect explains the shape of the aggregate demand curve, whereas the wealth effect causes shifts of the aggregate demand curve.
Which of the following would most likely decrease aggregate demand shift the AD curve to the left in the US?
Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)? An appreciation of the U.S. dollar. In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households.
Which of the following events would most likely reduce aggregate demand?
The correct answer is D; an increase in real interest rates. It reduces aggregate spending, and therefore, aggregate demand.
What happens when investment decreases?
A reduction in investment would shift the aggregate demand curve to the left by an amount equal to the multiplier times the change in investment. When the Fed seeks to decrease aggregate demand, it sells bonds. That lowers bond prices, raises interest rates, and reduces investment and aggregate demand.
Which of the following are the four components of determinants of aggregate demand?
Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports.
Which of the following are determinants of aggregate demand AD )?
The five components of aggregate demand are consumer spending, business spending, government spending, and exports minus imports.
Which of the following are the four components or determinants of aggregate demand multiple select question?
We’ve already learned the four components of GDP– consumer spending, investment spending, or business spending, government spending, and net exports, exports minus imports. And that’s the components of aggregate demand.