Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. To increase real GDP, the government can use a fiscal stimulus of
A) increasing taxes only.
B) decreasing government expenditure only.
C) decreasing taxes and/or increasing government expenditure.
D) decreasing government expenditure and simultaneously increasing taxes.
E) increasing the quantity of money.
C
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According to the quantity theory of money, a 10 percent increase in the money supply leads to a 10 percent increase in:
A. velocity. B. unemployment. C. the price level. D. real GDP.
A 2 percent increase in the price of jeans leads to a 5 percent decrease in the quantity demanded of jeans. The absolute price elasticity of demand is
A) 2.5. B) 1. C) 0.4. D) 0.2.
The ratio of the marginal utility of coffee to the marginal utility of donuts is four for an individual maximizing utility. This implies that
A. the coffee to donuts price ratio is one to four. B. this person always eats donuts with coffee. C. a donut is four times more valuable than a cup of coffee. D. the coffee to donuts price ratio is four to one.
When foreign output increases
A. U.S. exports tend to decrease. B. U.S. exports tend to increase. C. U.S. exports tend to be unaffected. D. Imports to the United States tend to decrease.