Assume the economy is operating below full employment. Which of the following policy actions will allow aggregate spending to increase but will not increase the size of the government in the process?
A. Increase government spending and leave tax rates unchanged.
B. Decrease government spending by more than an increase in taxes.
C. Decrease tax rates and leave government spending unchanged.
D. Increase government spending and taxes by the same amount.
Answer: C
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During a recession, the
A) cyclical rate of unemployment is positive. B) natural rate of unemployment has fallen. C) cyclical rate of unemployment is zero. D) cyclical rate of unemployment is negative.
Why are transfer payments not included in GDP?
A) The amount is too low to have any effect. B) Unemployment varies and can't be tracked. C) Money companies receive from the government isn't reported. D) They do not represent payments to those who contributed resources to currently produced goods or services.
An individual who has stopped looking for a job but has looked in the past and still wants a job is referred to as
A) a contingent worker. B) a productive worker. C) a marginally attached worker. D) an unemployed worker.
Compounding refers to
A) the calculation of interest rates after the compounding effect of taxes has been allowed for. B) the paying back of both interest and principal during the life of a fixed payment loan. C) the process of earning interest on both the interest and the principal of an investment. D) the increased value of an investment that arises from the payment of periodic interest.