When governments implement contractionary fiscal policy to increase taxes, which of the following is most likely to happen for the economy in the short run? Real GDP falls and price level rises Real GDP falls and price level falls Real GDP rises and price level rises Real GDP rises and price level falls.

When governments implement contractionary fiscal policy to increase taxes, which of the following is most likely to happen for the economy in the short run? Real GDP falls and price level rises Real GDP falls and price level falls Real GDP rises and price level rises Real GDP rises and price level falls.

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Costs Of Taxation

Section: Chapter Questions

Problem 3CQQ

See similar textbooks

Similar questions

Do 100 200 300 400 500 600 Quontity thousonds of apartments per monih) In the figure above, the demand curve shifts rightward from Dy to D; so that D; is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be Oa asurplus and an increase in search costs. Ob. ashortage and an increase in search costs. Oc ashortage and a decrease in search costs. O d. asurplug and a decrease in search costs Rent hundreds of dollarn per month}
What is the government budget constraint? How does it help us understandthe causes of high infation?
A challenger presidential candidate vows to cutentitlement spending by 20 percent in the first fewweeks that he is in office. Why is it unlikely thecandidate could achieve this reduction?
Which of the following is NOT a tool of fiscal policy. O taxes O government spending Onterest rates none of the above Question 2 Assume the economy is in a deep recession. The appropriate fiscal policy response would be to: raise taxes and raise govemment expenditures cut taxes and cut govermment expenditures raise taxes and cut government expenditures O cut taxes and increase government expenditures D Question 3 Crowding out refers to the fact that: Tax cuts will cause inflation O Tax cuts may result in higher interest rates which will "crowd out" business investment spending O increased government spending will crowd out spending on imports none of the above
How does tax affect AE line? Draw graphs to explain
Eggs have a supply curve that is linear andupward-sloping and a demand curve that is linearand downward-sloping. If a 2 cent per egg tax isincreased to 3 cents, the deadweight loss of the taxa. increases by less than 50 percent and may evendecline.b. increases by exactly 50 percent.c. increases by more than 50 percent.d. The answer depends on whether supply ordemand is more elastic.
The incidence of a tax is determined by which side of the market is less sensitive to a change in price O who pays the tax out of pocket. whether the supply curve or demand curve shifts as a result of the tax. O how much tax revenue it generates. how much paperwork there is to complete.
32. Suppose the frice elasticity of demand for commodity M is less than one. When a tax is imposed on commodity M production, it changes the price, quantity, and consumer spending in which of the following ways? - Price Quantity Spending Decrease Increase Decrease a. Increase Decrease b. Decrease Increase Decrease tncrease C. Decrease Increase Decrease
Government levied a tax on good A. The less elastic the demand is, the greater or the smaller the tax burden consumers bear? Also, is the after-tax equilibrium quantity the greater or smaller? Consumers’ tax burden: After-tax equilibrium quantity:
Suppose that the government imposes a tax onheating oil.a. Would the deadweight loss from this tax likely begreater in the first year after it is imposed or in thefifth year? Explain.b. Would the revenue collected from this tax likely begreater in the first year after it is imposed or in thefifth year? Explain.
1. consider public policy aimed at smoking a. studies indicate that the price elasticity of the demandmfor cigarettes is about 0.4. If a packet of cigarette is currently priced at $6 and goverment wants to reduce smoking by 20percent, by how miuch should it increase through levying a tax b. if the government permanently increase the price of cigarette will the policy have a larger effect on smoking one year from now or five years from now. explain c. studies also show that teenagers have a higher price elasticity of demand for cigarette than adults do. why might this be true
Snirt the aggregate demand curve on the grapn to snow the impact or a tax nike. 130 PRICE LEVEL 120 110 100 90 80 70 0 10 20 30 OUTPUT O Aggregate Demand 40 50 60 Aggregate Demand CO