Answer Happy

Question 9 According to the neoclassical market clearing model, with lump sum taxes and exogenous labour supply, a temporary increase in government purchases A[] increases current GDP and consumption. B)[ ] increases investment and future GDP. C[ ] increases the interest rate on long term bonds. D[ ] B and C. E)[ ) none of the above. (4 marks] Question 10 If the time path of government purchases does not change and the government cuts the current labour income tax rate, then: A[ ] labour supply is shifted to the future. B)[ ] labour supply is shifted to the present. C[ ) present GDP is reduced. D[ ] future GDP is increased. E[ ] A and D. F)[ ] there is no change in GDP because of Ricardian equivalence. G[ ] None of the above. [4 marks]