« previous next »

Author Question: Why is the tax multiplier smaller (in absolute value) than the autonomous spending multiplier? ... (Read 66 times)

bobbie

  • Hero Member
  • *****
  • Posts: 592
on: Jun 30, 2018
Why is the tax multiplier smaller (in absolute value) than the autonomous spending multiplier?
 
  What will be an ideal response?

Question 2

If the Fed sells government bonds in the open market, it will cause:
 
  A) a downward movement along the supply curve for reserves.
  B) a shift of the supply curve for reserves to the left.
  C) a shift of the supply curve for reserves to the right.
  D) an upward movement along the supply curve for reserves.
Macroeconomics ¦ Acemoglu, Laibson, List ¦ 3rd Edition
Buy Test-Bank


fffftttt

  • Sr. Member
  • ****
  • Posts: 322
Reply #1 on: Jun 30, 2018
Answer to Question 1

An increase in taxes first reduces household income by the amount of the tax. Because the MPC is always less than one, the decrease in consumer spending resulting from the increase in taxes is less than the actual increase in taxes.

Answer to Question 2

B


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Barbituric acid, the base material of barbiturates, was first synthesized in 1863 by Adolph von Bayer. His company later went on to synthesize aspirin for the first time, and Bayer aspirin is still a popular brand today.

Did you know?

The toxic levels for lithium carbonate are close to the therapeutic levels. Signs of toxicity include fine hand tremor, polyuria, mild thirst, nausea, general discomfort, diarrhea, vomiting, drowsiness, muscular weakness, lack of coordination, ataxia, giddiness, tinnitus, and blurred vision.

Did you know?

Pregnant women usually experience a heightened sense of smell beginning late in the first trimester. Some experts call this the body's way of protecting a pregnant woman from foods that are unsafe for the fetus.

Did you know?

Addicts to opiates often avoid treatment because they are afraid of withdrawal. Though unpleasant, with proper management, withdrawal is rarely fatal and passes relatively quickly.

Did you know?

Before a vaccine is licensed in the USA, the Food and Drug Administration (FDA) reviews it for safety and effectiveness. The CDC then reviews all studies again, as well as the American Academy of Pediatrics and the American Academy of Family Physicians. Every lot of vaccine is tested before administration to the public, and the FDA regularly inspects vaccine manufacturers' facilities.

Compared with modern humans, Homo erectus has a larger face, lacks a chin and canine fossa, and has Compared with modern humans, Homo erectus has a larger face, lacks a chin and canine fossa, and has
Absolute Thresholds Absolute Thresholds
Reduced mobility in late adulthood often results in more limited activities and smaller social ... Reduced mobility in late adulthood often results in more limited activities and smaller social ...
Airflow through the large diameter upper intake manifold is distributed to smaller diameter ... Airflow through the large diameter upper intake manifold is distributed to smaller diameter ...
How to solve inequalities involving absolute values (Part 1) How to solve inequalities involving absolute values (Part 1)
Researchers and Research Spending, 2009 Researchers and Research Spending, 2009
Video: Bulk flow - factors that influence bulk flow

For a complete list of videos, visit our video library