If an economy is experiencing both full employment and price stability, within the Keynesian model, a major tax reduction probably would cause
a. an increase in unemployment in the near future.
b. an increase in the general level of prices unless government expenditures are also reduced.
c. an increase in the interest rate since individuals will reduce their savings in response to the tax cut.
d. a decrease in consumption unless the expected budget deficit is financed by selling bonds to foreigners.
B
You might also like to view...
The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that
A) monopolies don't have a supply curve. B) monopolies don't have a demand curve. C) monopolies have the same supply curve as perfectly competitive firms. D) monopolies maximize profit.
In September 2008, the MONTHLY rate of inflation in Zimbabwe approached 489 BILLION percent. An inflation rate such as this would:
A. seriously disrupt normal commerce. B. decrease the natural rate of unemployment. C. be too high to calculate using the CPI. D. All of these