If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential real GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential real GDP
A) $7.25 trillion B) $1 trillion C) $500 billion D) $250 billion
D
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Holding other things constant, a decrease in the inflation rate in the US compared to the Canadian economy may cause the demand for the US dollar to _____________ and the supply to __________
a. Increase; decrease b. Increase, increase c. Decrease; Increase d. Decrease; Decrease
Which of the following is a positive economic statement?
a. Government control of rent is a fair way to help poor people afford housing. b. Government control of rent keeps landlords from charging too much rent. c. Government control of rent decreases the number of new apartments constructed. d. Government control of rent is an injustice.
When higher taxes discourage whatever activity is being taxed, that is called
A. a multiplier effect. B. tax discouragement. C. a negative incentive effect. D. tax abatement.
Answer the question on the basis of the following information: Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is P L and that of capital is P C . The marginal product of labor is MP L and that
of capital is MP C . The firm sells its product competitively at a price of P X . Refer to the given information. If MP C /P C > MP L /P L , the firm: A. may be maximizing profits, but it is not minimizing costs. B. may be minimizing costs, but it is not maximizing profits. C. is neither minimizing costs nor maximizing profits. D. is minimizing costs and maximizing profits.