Increases in government purchases of goods and services, G, and cuts in taxes, T, can have...

Increases in government purchases of goods and services, G, and cuts in taxes, T, can have a larger effect on aggregate demand. This is called the ____________________________ effect. This effect will be greater, the (higher, lower) the marginal propensity to consume is. (2 points; 1 point each)

While an increase in G or a cut in T, by raising incomes and the demand for money, also raise interest rates and reduce investment spending. This effect of higher G or lower T is called __________________________________. (1 point)

Expert Solution

Rahul Sunny answered 2 years ago

The budget surplus is defined as taxes less transfers and government purchases, T − G, where...

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Productivity is a key factor in the cost of goods and services. Increases in productivity can...

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