Using the labor market, the production function Real GDP = T (L, K), and the LRAS curve, describe the process by which a decrease in income taxes impacts economic growth
Lower taxes on income shifts the supply of labor curve rightward, causing the equilibrium quantity of labor to increase. With more labor working, the economy would move up along its production function to a higher level of Real GDP. More Real GDP corresponds to a shifting of the LRAS curve rightward (economic growth).
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The value of the money multiplier depends on
A) the interest rate offered on bonds currently being purchased by the Fed. B) the ratio of total assets to total liabilities for the banking system as a whole. C) the reserve ratio. D) the interest rate offered on bonds currently being sold by the Fed.
An increase in energy costs will most likely cause the price level and real gross domestic product to change in which of the following ways?
A) PL increase; GDP increase B) PL increase; GDP decrease C) PL increase; GDP not change D) PL decrease; GDP increase E) PL decrease; GDP decrease