Author Question: An increase in business tax rates, combined with a decrease in consumer confidence, would have what ... (Read 89 times)

jazziefee · **on:** Jun 30, 2018

An increase in business tax rates, combined with a decrease in consumer confidence, would have what effect on aggregate demand?
a. AD would increase.
b. AD would decrease.
c. AD would stay the same.
d. AD could either increase or decrease, depending on which change was of a greater magnitude.

Question 2

If the spending multiplier equals 5 and equilibrium income is 2 billion below potential GDP, then _____ to reach the potential real GDP level.
a. total spending needs to increase by 0.1 billion
b. nominal GDP needs to increase by 1.2 billion
c. total spending needs to decrease by 6 billion
d. nominal GDP needs to decrease by 12 billion
e. total spending needs to increase by 0.4 billion