CS403 GDB Spring 2024 – GDB – Solution VU

CS403 GDB Spring 2024

CS403 GDB Spring 2024 Solution idea:

An increase in income taxes reduce disposable personal income and thus reduces consumption ( but by less than the change in disposable personal income). That shifts the aggregate demand curve lefward by an amount equal to the initial change in consumption that the change in income taxes produces times the multiplier.
So increase the price due to
Imports are more than exports
energy and water shortage
Cost of doing business is high
Government’s spending is more than revenue
Consumption is greater than saving.

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