Other things being equal, an increase in taxes will
A. lead to a corresponding reduction in interest rates increasing the crowding out effect.
B. cause a decrease in aggregate demand due to decreases in consumption, investment, or net exports.
C. influence the short run aggregate supply curve but not the aggregate demand curve.
D. lead to a reduction in the long run aggregate supply curve as businesses enjoy greater profits.
Answer: B
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The Social Security and Medicare programs have been a failure in terms of reducing poverty among elderly U.S. citizens
Indicate whether the statement is true or false
Keynes was motivated to create a macroeconomic theory different from classical theory because
A) he believed in government intervention in the economy. B) he believed in the idea of the invisible hand. C) monetary policy was more important than the classicals acknowledged. D) classical theory was inconsistent with the data in the Great Depression.