question archive Assuming that marginal propensity to consume is not zero, and that the balanced budget multiplier is positive, a decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following must occur? I
Assuming that marginal propensity to consume is not zero, and that the balanced budget multiplier is positive, a decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following must occur? I
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Assuming that marginal propensity to consume is not zero, and that the balanced budget multiplier is positive, a decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following must occur?
I. Government spending decreases to maintain a balanced budget.
II. Consumption spending increases because disposable personal income increases
III. Investment spending decreases because disposable personal income increases
I only
III only
II only
I and III only
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Answer:
II only ..
(Consumption spending increases because disposable personal income increases,
As there is decreased in the lupsum personal income taxes so, there will be more money to the consumers to spend and their disposable personal income increased. As a result there will be increase in real GDP)
