The increase in government purchases on aggregate demand

Assignment Help Business Economics

Reference no: EM131173949

When comparing a $100 billion increase in government purchases to a $100 billion decrease in tax revenue, the effect of the increase in government purchases on aggregate demand is

A. greater than the effect of the tax decrease because households save a portion of their tax decrease.

B. equal to the effect of the tax decrease since both government purchases and taxation are fiscal policy instruments.

C. less than the effect of the tax decrease because of the time lag involved in obtaining funding for government purchases.

D. positive whereas the effect of the tax decrease is negative.

Reference no: EM131173949

Questions Cloud

Aggregate demand can be defined : Aggregate demand can be defined as:

Each anti-trade argument with its counter argument : When we depend on imports to provide necessary products (food, oil etc.) we make ourselves vulnerable to the will of other countries. If they decided to stop selling to us then our economy or society could be critically hurt. In order to develop new ..

Considering the two investment opportunities : Kevin has $100,000 and is considering the following two investment opportunities. Investment A requires an initial investment of $100,000 and promises to return an annual amount of $23,740 for 5 years. Investment B requires an initial investment of $..

Straight-line-double declining-balance depreciation : An equipment costs $100,000, has a useful life of 5 years and has zero salvage value at the end of its useful life. Determine the depreciation allowance for the first two years and book value at the end of year 1 and year 2 for the following methods...

The increase in government purchases on aggregate demand : When comparing a $100 billion increase in government purchases to a $100 billion decrease in tax revenue, the effect of the increase in government purchases on aggregate demand is

Briefly describe the great depression : Briefly describe the Great Depression. Explicitly explain why it is believed to have been an American led world recession. Be sure to highlight the important causes in your explanation.

Develop relationship with the ministry of transportation : Imagine you are the director of global business development for a large Swedish engineering company that wants to win a contract to build roads in Kenya, a project funded by the World Bank. You need to develop a relationship with the Ministry of Tran..

Describe general environment of technological progress : Briefly describe the general environment of technological progress. Why might the market deliver a suboptimal level of technology? Discuss in detail three of the determinants of the success of a country's technological development.

Firm operating in perfectly competitive industry : A firm operating in a perfectly competitive industry is producing a daily output which supports total revenue equal to $5,000. That output is its profit-maximizing output. The firms average total cost is $8, its marginal cost is $10, and its average ..

User Account

All Pages