You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The Chairperson of the BEA tells you that he believes the current unemployment rate is too low. The unemployment rate can be increased if aggregate output decreases. He wants to know what policy to pursue to decrease aggregate output by $100 billion. The best estimate he has for the MPC is 0.9. Which of the following policies should you recommend?
A. Cut taxes by $60 billion and to increase government spending by $60 billion.
B. Decrease government spending by $100 billion.
C. Decrease government spending by $10 billion.
D. Increase taxes by $100 billion.
Answer: C
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If the Fed's policy is contractionary, it will
A) use open market operations to sell Treasury bills. B) lower the reserve requirement. C) use open market operations to buy Treasury bills. D) lower the discount rate.
Myron worked at a factory where he earned $20,000 per year. One day, he quit his job and opened a bumper sticker business. After one year, his business earned $60,000 in sales revenue and he incurred $30,000 in direct business expenses. If he received no salary from the new business, what is his economic profit?
a. $10,000 b. $30,000 c. $60,000 d. $20,000 e. $50,000
A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it and spins it into yarn. The yarn is then sold to a knitting mill, which produces and sells sweaters. In calculating GDP we would count:
A. the raw wool, the yarn and the sweaters. B. only the yarn and the sweaters. C. only the sweaters. D. only the raw wool and the yarn.
Refer to the information provided in Figure 2.5 below to answer the question(s) that follow.
Figure 2.5Refer to Figure 2.5. For this economy to move from Point B to Point C so that an additional 20 OLED televisions could be produced, production of LCD televisions would have to be reduced by
A. more than 30. B. exactly 60. C. fewer than 30. D. exactly 30.