Assume a country is required by law to balance the budget every year. Suppose aggregate demand falls, causing a recession and a budget deficit
To balance the budget, what would the government need to do with the level of government spending and taxes? How would these changes in government spending and taxes affect aggregate demand and the economy?
To balance the budget, the government would need to lower government spending and raise taxes, both of which would decrease aggregate demand, making the recession worse.
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Analyzing each possible outcome in a game one-by-one to locate Nash equilibria is called dominant strategy
Indicate whether the statement is true or false
Which area in the above figure shows the producer surplus at the price and quantity that would be attained if the industry were perfectly competitive?
A) A + B + C + D + E B) C + D + E + F + G + H C) F + G + H D) F + G + H + I + J + K
Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A) a decrease in the price of apples B) an increase in the price of orange juice, a substitute for apple juice C) an increase in the price of apples D) a decrease in the price of granola bars, a complement for apple juice
Assuming price elasticity of demand is reported as an absolute value, an inelastic demand has a measured elasticity:
A. greater than zero. B. greater than one. C. less than one. D. exactly one.