Compare the effect on the price level and real GDP of a decrease in tax rates assuming a supply-side effect versus no supply-side effect
Compared to no supply-side effect, including a supply-side effect for the decrease in tax rates will cause the price level to increase ________ and real GDP to increase ________.
A) more; less B) less; less C) more; more D) less; more
D
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In 1961, President John F. Kennedy, acting upon advice from his economists, proposed tax cuts. The advice he received
a. was opposed to the teaching of Keynes, who had taught that tax cuts were counterproductive. b. was opposed to the teaching of Keynes, who had taught that all attempts to stabilize the economy were futile. c. came from economists who had studied Keynes's ideas when those ideas were only a few years old. d. came from economists who were unaware of Keynes's ideas because those ideas had not yet been widely disseminated at that time.
An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is:
A. unit elastic. B. inelastic. C. elastic. D. perfectly elastic.