« previous next »

Author Question: Why is the tax multiplier smaller (in absolute value) than the autonomous spending multiplier? ... (Read 89 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?

People often find it difficult to accept the idea that bacteria can be beneficial and improve health. Lactic acid bacteria are good, and when eaten, these bacteria improve health and increase longevity. These bacteria included in foods such as yogurt.

Did you know?

Coca-Cola originally used coca leaves and caffeine from the African kola nut. It was advertised as a therapeutic agent and "pickerupper." Eventually, its formulation was changed, and the coca leaves were removed because of the effects of regulation on cocaine-related products.

Did you know?

During pregnancy, a woman is more likely to experience bleeding gums and nosebleeds caused by hormonal changes that increase blood flow to the mouth and nose.

Did you know?

Blood in the urine can be a sign of a kidney stone, glomerulonephritis, or other kidney problems.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Adults in late middle adulthood frequently look forward to spending more time with their partner Adults in late middle adulthood frequently look forward to spending more time with their partner
Transverse Breaks the shaft of a bone across its longitudinal axis; the break is in the fibula, the Transverse Breaks the shaft of a bone across its longitudinal axis; the break is in the fibula, the
Constructing large motifs from smaller ones Constructing large motifs from smaller ones
Galaxies Forming by Combining Smaller Units Galaxies Forming by Combining Smaller Units
The process of filtration in the kidneys, where smaller solutes, such as the electrolytes sodium and ... The process of filtration in the kidneys, where smaller solutes, such as the electrolytes sodium and ...
Calculus help: Find the absolute minimum and absolute maximum f(x) = (x2 —1) on [-1.2] Calculus help: Find the absolute minimum and absolute maximum f(x) = (x2 —1) on [-1.2]
Video: Frequency of stimulation and force (Recruitment of motor units and force)

For a complete list of videos, visit our video library