Sia
Question
Statistics
Posted 10 months ago
Gerbilia decreased lump-sum taxes by billion.
What measure can be used to determine the final impact on aggregate demand that occurs as a result of the change in lump-sum taxes?
Choose 1 answer:
(A) The tax multiplier
(B) The money multiplier
(C) The balanced budget multiplier
(D) No calculation is needed because AD will decrease by billion
(E) The expenditure multiplier
Sign in to unlock the answer
Answer from Sia
Posted 10 months ago
Solution by Steps
step 1
Identify the correct measure to determine the impact on aggregate demand due to a change in lump-sum taxes
step 2
The expenditure multiplier is the appropriate measure, which is calculated as or
step 3
The tax multiplier is related but specifically measures the impact of tax changes on aggregate demand
step 4
The money multiplier relates to the banking system's ability to increase the money supply through lending
step 5
The balanced budget multiplier indicates the effect on aggregate demand when government spending and taxes are changed by the same amount
step 6
No calculation is not an option because the impact on aggregate demand is not a direct one-to-one decrease by the amount of the tax change
step 7
The expenditure multiplier is the correct choice because it considers the marginal propensity to consume (MPC) and shows the total impact on aggregate demand
Answer
The correct answer is (E) The expenditure multiplier.
E
Key Concept
Expenditure Multiplier
Explanation
The expenditure multiplier measures the effect of a change in investment spending on aggregate demand, taking into account the marginal propensity to consume.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Unlock Smarter Learning with AskSia Super!
Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.
30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question