Asked by Gurkamal Cheema on May 02, 2024
Verified
According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size.
Keynesian Analysis
An economic theory that emphasizes the role government policies and spending should play in stabilizing the economy, maintaining low unemployment, and controlling inflation.
Aggregate Demand
The total demand for goods and services within a particular market.
Tax Cut
A reduction in the amount of taxes imposed by a government on its citizens.
- Acquire knowledge on the consequences of fiscal measures, like tax decreases and public expenditures, on the economic landscape.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
False
Explanation :
According to traditional Keynesian analysis, an increase in government expenditures has a larger effect on aggregate demand than a tax cut of the same size, primarily due to the marginal propensity to consume being less than 1, which reduces the multiplier effect of tax cuts compared to direct government spending.
Learning Objectives
- Acquire knowledge on the consequences of fiscal measures, like tax decreases and public expenditures, on the economic landscape.