President Obama has discussed raising income taxes for individuals earning over $250,000 in income. Explain how these higher income taxes will affect the aggregate demand curve
What will be an ideal response?
Raising the income tax decreases the amount of disposable income available to those households. Lower disposable income decreases consumption at every price level. The result is a shift in the aggregate demand curve to the left.
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Refer to Figure 12-15. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?
A) Panel A B) Panel B C) Panel C D) Panel D
Crowding out can best be defined as:
a. private investment increases growth rates and decreases deficits. b. restrictive monetary policy raises interest rates and decreases investment. c. government deficits increase interest rates and decrease investment. d. consumption spending increases interest rates and decreases investment.