According to the Keynesian view, if real GDP is slowing and the economy appears to be headed for a recession, a reduction in tax rates is
a. highly appropriate because it will stimulate aggregate demand and, thereby, help to strengthen the economy.
b. highly inappropriate because it will either reduce the size of the budget surplus or increase the size of the deficit.
c. not very important because the "demand stimulus effects" of the tax cut will be largely offset by additional borrowing.
d. not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future.
A
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The current account shows international transactions in goods and services, the capital account shows international transactions involving the flow of financial assets, and the official reserve transactions account shows movement of international reserves
a. True b. False
James insured his car with a renowned insurance company that checked his driving skills and verified his accident records before insuring his car. After paying two premiums for this insurance, James took to drinking and driving. This action of James is likely to create:
a. an economic loss. b. a positive externality. c. an economic bad. d. a moral hazard. e. diseconomies of scale.