According to the Keynesian approach, an increase in taxes
A) will not impact consumption, as most consumption is autonomous.
B) will reduce consumption by an amount less than the change in taxes.
C) will increase consumption, as the government will spend the extra tax revenue and that increases consumption.
D) will reduce consumption exactly by the amount of the taxes.
B
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If a hurricane were to wipe out the majority of the eastern seaboard in the United States:
A. neither the short-run nor long-run aggregate supply curves would be affected. B. only the long-run aggregate supply curve would shift left. C. only the short-run aggregate supply curve would shift left. D. the long-run and short-run aggregate supply curves would both shift left.
If the economy suffers a recession for reasons unrelated to fiscal policy, the deficit should rise and
A. inflation should fall. B. interest rates should fall. C. real GDP should fall. D. all of the above are correct.