Which of the following statements is true?
a. Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.
b. According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation.
c. The presence of the automatic stabilizers tends to destabilize the economy.
d. To combat inflation, Keynesians recommend lower taxes and greater government spending.
a
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Consider an economic policy regime in which rules are well-known but frequently ignored. Which of these statements is true?
A) This regime might work in the long-run, but is unlikely to produce good outcomes in the short run. B) Policymakers in this regime might find that rules are being broken with increasing frequency. C) This regime is more likely to be supported by nonactivist, than by activist policymakers. D) This regime is more likely to result in high unemployment than in high inflation. E) This regime is unlikely to produce large government budget deficits.
Which of the following statements is (are) correct? The Mundell-Fleming model is
a. a new closed-economy model. b. implicitly assumes a fixed domestic price level. c. is an open-economy version of the IS-LM model. d. Both b and c