In the Keynesian model with a fixed money wage but a flexible price level, an increase in taxes will lower
a. output and the price level, but leave the interest rate unchanged.
b. output, the price level and the interest rate.
c. output and the interest rate, but leave the price level unchanged.
d. output and the price level, but increase the interest rate.
e. the price level and the interest rate, but leave output unchanged.
B
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Cross elasticity of demand for
a. substitutes will normally be positive. b. complements will normally be positive. c. substitutes will normally be negative. d. complements will normally be infinite.
The structural deficit or surplus
a. shows the government where to make cuts in expenditures to follow the balanced budget requirement. b. reveals the complicated structure underlying government spending and tax policy. c. is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. d. includes all government budgets-federal, state, and local.