Refer to Table 18.1. M2 in this simple economy equals

Which of the following helps explain how the multiplier and crowding-out effect impact the size of the shift in aggregate demand from a tax change

a. Tax cuts stimulate consumer spending, earnings and profits rise, which further stimulates consumer spending—the multiplier effect. b. The higher income leads to an increase in the demand for money, which tends to lead to higher interest rates. c. The higher interest rates make borrowing more costly and reduce investment spending—the crowding-out effect. d. All of the above

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the

a. actual burden of this tax falls mostly on consumers. b. actual burden of this tax falls mostly on manufacturers. c. actual burden of the tax would be shared equally by producers and consumers. d. tax would clearly be a progressive tax.