Suppose the government increases the corporate income tax rate. This is
A) an expansionary fiscal policy that will shift the aggregate demand curve to the right by an amount equal to the initial change in corporate income tax revenue times the spending
multiplier.
B) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
C) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in the corporate income tax rate times the spending multiplier.
D) an automatic fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
Answer: B) a contractionary fiscal policy that will shift the aggregate demand curve to the left by an amount equal to the initial change in investment times the spending multiplier.
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The long-run effect of a decrease in the growth rate of the quantity of money is a
A) higher real interest rate. B) lower nominal interest rate. C) higher inflation rate. D) higher nominal interest rate. E) lower real interest rate.
It is widely believed that the Federal Reserve's most important function is
A) to provide loans to the federal government. B) to regulate the money supply. C) to set the legal, controlled consumer interest rates. D) to lend to risky customers.