« previous next »

Author Question: Why is the tax multiplier smaller (in absolute value) than the autonomous spending multiplier? ... (Read 118 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?

Dogs have been used in studies to detect various cancers in human subjects. They have been trained to sniff breath samples from humans that were collected by having them breathe into special tubes. These people included 55 lung cancer patients, 31 breast cancer patients, and 83 cancer-free patients. The dogs detected 54 of the 55 lung cancer patients as having cancer, detected 28 of the 31 breast cancer patients, and gave only three false-positive results (detecting cancer in people who didn't have it).

Did you know?

Eating food that has been cooked with poppy seeds may cause you to fail a drug screening test, because the seeds contain enough opiate alkaloids to register as a positive.

Did you know?

Though “Krazy Glue” or “Super Glue” has the ability to seal small wounds, it is not recommended for this purpose since it contains many substances that should not enter the body through the skin, and may be harmful.

Did you know?

Common abbreviations that cause medication errors include U (unit), mg (milligram), QD (every day), SC (subcutaneous), TIW (three times per week), D/C (discharge or discontinue), HS (at bedtime or "hours of sleep"), cc (cubic centimeters), and AU (each ear).

Did you know?

GI conditions that will keep you out of the U.S. armed services include ulcers, varices, fistulas, esophagitis, gastritis, congenital abnormalities, inflammatory bowel disease, enteritis, colitis, proctitis, duodenal diverticula, malabsorption syndromes, hepatitis, cirrhosis, cysts, abscesses, pancreatitis, polyps, certain hemorrhoids, splenomegaly, hernias, recent abdominal surgery, GI bypass or stomach stapling, and artificial GI openings.

Lithotripsy. The direction of a sound pulse crushes the stones into smaller fragments that can be pa Lithotripsy. The direction of a sound pulse crushes the stones into smaller fragments that can be pa
Galaxies Forming by Combining Smaller Units Galaxies Forming by Combining Smaller Units
Primates exhibit prolonged life histories, spending more time in each stage of life than most other Primates exhibit prolonged life histories, spending more time in each stage of life than most other
Ardipithecus kadabba has large canine teeth that are only slightly smaller than those of living apes Ardipithecus kadabba has large canine teeth that are only slightly smaller than those of living apes
Oil and Natural Gas Production from More Wells in Smaller Areas Oil and Natural Gas Production from More Wells in Smaller Areas
Increase in total spending in presidential campaigns, 1976-2020 Increase in total spending in presidential campaigns, 1976-2020
Video: The primary factors that affect circulation - MABP, CO and SVR

For a complete list of videos, visit our video library