Describe the differences (in sign and relative magnitude) between the government purchases multiplier and the tax multiplier
What will be an ideal response?
First, changes in government purchases affect GDP in the opposite direction as changes in taxes. As a result, the government purchases multiplier is positive, and the tax multiplier is negative. Second, the government purchases multiplier is larger in magnitude than the tax multiplier. This means that a dollar change in government purchases will have a larger effect on GDP as compared to a dollar change in the taxes.
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The price elasticity of demand is the ratio of the change in quantity demanded to the change in price
a. True b. False Indicate whether the statement is true or false
When the U.S. housing market crashed, it caused all of the following except:
A. lenders to stop lending. B. banks to go bust due people not paying their mortgages. C. the U.S. economy to tip into the Great Recession. D. all sellers of real estate to profit when selling their house.