Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy
a. The personal income tax rate is lowered.
b. Congress cuts spending on defense.
c. College students are allowed to deduct tuition costs from their federal income taxes.
d. The corporate income tax rate is lowered.
e. The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.
a. This is expansionary fiscal policy.
b. Although a decrease in defense spending will lead to a decrease in aggregate demand, it is not part of fiscal policy because it is not intended to achieve a macroeconomic policy goal.
c. Although reducing taxes in this way will lead to an increase in aggregate demand, it is not part of fiscal policy because it is not intended to achieve a macroeconomic policy goal.
d. This is expansionary fiscal policy.
e. This is not part of fiscal policy because the action is not intended to affect the national economy.
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Which of the following would be counted as investment when calculating gross domestic product?
a) the purchase of a used computer by an auto manufacturer b) the purchase of a share of IBM stock by an employee c) the construction of a new house d) the construction of roads by the government e) the profit earned when selling shares of stock
Refer to Table 13-5. At the profit-maximizing or loss-minimizing output level
A) the firm makes a profit of $16. B) the firm incurs a loss equal to its fixed cost. C) the firm incurs a loss of $14. D) the firm makes a profit of $12.