question archive 1) Consider the original IS—curve introduced in Chapter 11
1) Consider the original IS—curve introduced in Chapter 11
Subject:EconomicsPrice: Bought3
1) Consider the original IS—curve introduced in Chapter 11. Suppose fly (that is7 the share of potential output spent on government purchases) increases. This leads to (select all that apply)? (a) A movement along the IS—curve. (b) The IS-curve shifts up. (c) The IS-curve shifts down. (d) The marginal product of capital goes down. (e) There is a positive aggregate demand shock. Answer: . According to the life—cycle permanent income hypothesis (select all that apply): (a) People smooth their consumption over their life—cycle. ( (C) People have permanent income. b) Consumption at any point during a person's life depends on his/ her income at that time. (d) Consumption over the life-cycle depends on a person's lifetime income. (e) Consumption and permanent income are independent. Answer: . If Ricardian Equivalence holds7 then the following is true (select all that apply): (a) What matters for consumption is the timing of tax changes. (b) People that expect a tax reduction next year will reduce consumption this year. (c) If the government announces that taxes will increase in ?ve years7 people will reduce their con- sumption right away. (d) Consumption does not depend on taxation. (e) An increase in lifetime income after taxes due to a future tax reduction Will lead to higher con- sumption this year. Answer:
