[Solved] A Tax Rebate by the Government Would

Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level, the federal government would need to increase government purchases by A)$100 billion. B)less than $100 billion. C)more than $100 billion. D)None of the above is correct.The federal government must decrease government purchases in this case.

Suppose real GDP is $1.7 trillion, potential real GDP is $1.75 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level, the federal government would need to decrease taxes by A)$50 billion. B)less than $50 billion. C)more than $50 billion. D)None of the above is correct.The federal government should raise taxes in this case.

Suppose real GDP is $1.7 trillion and potential real GDP is $1.74 trillion.An increase in government purchases of $40 billion would cause real GDP to ________ potential real GDP (assuming a constant price level). A)equal B)be less than C)be more than D)There is insufficient information given here to draw a conclusion.

If the government purchases multiplier equals 2, and real GDP is $1.7 trillion with potential real GDP of $1.75 trillion, then government purchases would need to increase by ________ to restore the economy to potential real GDP. A)$1.75 trillion B)$500 billion C)$100 billion D)$50 billion E)$25 billion

If the absolute value of the tax multiplier equals 1.6, real GDP is $1.3 trillion, and potential real GDP is $1.34 trillion, then taxes would need to be cut by ________ to restore the economy to potential real GDP. A)$15 billion B)$25 billion C)$40 billion D)$64 billion E)None of the above is correct.Taxes should be increased in this case.

A government tax rebate of $1,000 would ________ your disposable income by ________. A)increase; less than $1,000 B)increase; $1,000 C)decrease; less than $1,000 D)decrease; $1,000

A one-time tax rebate, which is not expected to be extended in future years, will A)have a small positive effect on consumption and aggregate demand. B)have no effect on consumption and aggregate demand. C)have a significant positive effect on consumption and aggregate demand, with aggregate demand growing by a multiple of the tax rebate. D)increase aggregate supply and aggregate demand. E)have a significant negative effect on aggregate demand as people will expect taxes to rise in the future.

A tax rebate, which is expected to be offered in this and all future years, will A)have a small positive effect on consumption and aggregate demand. B)have no effect on consumption and aggregate demand. C)have a significant positive effect on consumption and aggregate demand, with aggregate demand growing by a multiple of the tax rebate. D)increase aggregate supply and aggregate demand. E)have a significant effect on aggregate supply, with firms expanding by a multiple of the increased tax take.

The tax multiplier is calculated as one minus the government purchases multiplier.

Suppose real GDP is $1.8 trillion and potential real GDP is $1.85 trillion.If the federal government increases government purchases by $50 billion, then the economy will be brought to equilibrium at potential real GDP.