Refer to Table 9-4. Assume the market basket for the consumer ...

[ENagel]

Refer to Table 9-4. Assume the market basket for the consumer price index has two products  meat and potatoes  with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals
 
  A) 125. B) 129. C) 135. D) 141.

Question 2

Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy.
 
  a. The personal income tax rate is lowered.
  b. Congress cuts spending on defense.
  c. College students are allowed to deduct tuition costs from their federal income taxes.
  d. The corporate income tax rate is lowered.
  e. The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.

[leannegxo]

Answer to Question 1

D

Answer to Question 2

a. This is expansionary fiscal policy.
b. Although a decrease in defense spending will lead to a decrease in aggregate demand, it is not part of fiscal policy because it is not intended to achieve a macroeconomic policy goal.
c. Although reducing taxes in this way will lead to an increase in aggregate demand, it is not part of fiscal policy because it is not intended to achieve a macroeconomic policy goal.
d. This is expansionary fiscal policy.
e. This is not part of fiscal policy because the action is not intended to affect the national economy.