Assume the marginal propensity to consume (mpc) is 0.80 and the government increases taxes by $100 billion. the aggregate demand
1 answer:
The change in GDP that results from an increase in taxation is known as the tax multiplier. When the government raises taxes and MPC is , the tax multiplier also rises, which causes the aggregate demand to move to the left. However, this choice is flawed because the tax multiplier is $
billion.
Tax multiplier: MPC1 MPC=
The selection is in error. The increase in taxes would reduce consumers' disposable income and cause a decline in spending. As a result, aggregate demand will decrease and move $billion to the left. The assertion is untrue. The aggregate demand would decline initially as a result of a tax rise and later on due to a change in disposable income. Although.
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Answer: B.At equilibrium, quantity supplied and quantity demanded are equal ensuring that at that price consumers will not want more and producers will not supply more.
Explanation:
The point where the market demand and marker supply curves intersect is known as the equilibrium point. The price at which equilibrium occurs is the market clearing price.
It is called the market clearing price because at that price both producers and customers are in equilibrium. Above the equilibrium price, there's is excess supply and below the equilibrium price, there's excess demand.
