Assume the economy is in short-run equilibrium at a real GDP below its potential real GDP. According to Keynesian theory, which of the following policies should be followed?
a. The Federal Reserve should increase the money supply
b. The federal government should increase spending.
c. The federal government should do nothing because the economy will self correct to potential real GDP.
d. All of the above.
b
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The notion that in a world with n markets, if n - 1 are in equilibrium, so must the nth, is known as
A) the uncertainty principle. B) the first law of international trade. C) Walras Law. D) Friedman Law.
The summary of the flows of goods, services, assets, and currency in and out of a country in a particular year is
A. the balance of income statement. B. the balance of payments. C. the balance of trade. D. the trade deficit.
One method of assessing the degree to which current fiscal policies affect future generations is through a device called
A) inter-temporal fiscal accounting. B) generational accounting. C) long-term debt assessment technique. D) fiscal stabilization tool.
Refer to Scenario 7.5 below to answer the question(s) that follow.SCENARIO 7.5: You own and are the only employee of a company that customizes bicycles. Last year your total revenue was $60,000. Your costs for rent and supplies were $25,000. To start this business you invested an amount of your own capital that could pay you a $45,000 a year return.Refer to Scenario 7.5. A yearly normal return for your company is
A. $25,000. B. $35,000. C. $45,000. D. $70,000.