Question

If the government increases income taxes,

Group of answer choices

government spending declines and real output increases

consumption increases and real output increases

real output remains the same

consumption decreases and real output increases

Economic expansions in Europe and China would cause

Group of answer choices

the U.S. price level and real GDP to remain unchanged.

the U.S. price level and real GDP to rise.

the U.S. price level to fall and real GDP to rise.

the U.S. price level to rise and real GDP to fall.

Recessions in Canada and Mexico would cause

Group of answer choices

the U.S. price level and real GDP to fall

the U.S. price level and real GDP to fall

the U.S. price level to rise and real GDP to fall.

the U.S. price level to fall and real GDP to rise

Answer 1

1) Answer:- Option 4:- consumption decreases and real output increases.

Reason:- When rate of the income tax increase, the consumption habits will automatically decrease as it restricts the salaries people to buy the required goods and services at the prices fixed in the market. Such increase in the price will leads to less production of goods and services at certain period of time. Shortage of demand and supply will make the producers to fix the price for the products at very high level. Then the real output also increases as it was directly related with the rate of increase in the inflationary pressure.

2) Answer:- Option:- 3:-   the U.S. price level to fall and real GDP to rise.

Reason:- According to the recent survey it is noticed that electronic goods, furniture goods and many cost-free quality goods are imported by US with the the range of $540 million worth of import. Such imports goods are tend to very cheap while exchange value of the US dollar is very high when the compared with the value of the currencies of European and Chinese countries. It makes the US market price for the European and Chinese products tend to fall and the real GDP will rise which have directly proportion of decrease in the price level in the US Market.

3) Answer:- Option:- 3 the U.S. price level to rise and real GDP to fall.

Reason:- As we aware that both the countries Mexico and the Canada are the two leading trading partners for the US. Nearly 521.5 billion worth exports and imports are traded between two countries and US respectively. Recently, there was the critical period of Recession took place in Economies of Mexico and the Canada leading to the scarcity of certain imported goods which are very cheap when they are traded with Canada and Mexico. During recession time the production of goods and services rate was affected very drastically and leads to reduction in import rate and the earning through trade surplus. This in turn made the rate of the GDP of the US tend to fall to the considerable effect of decrease in the supply of goods produced in Mexico as well in the Canadian Countries.