Assume that we want to drive our economy out of recession by generating a $400 billion change in national income. The MPC is 0.8 . Which of the following policy prescriptions would generate the targeted $400 billion change in income?
a. $120 billion increase in government spending and $50 billion increase in tax revenue
b. $140 billion increase in government spending and $70 billion increase in tax revenue
c. $160 billion increase in government spending and $120 billion increase in tax revenue
d. $220 billion increase in government spending and $100 billion increase in tax revenue
e. $400 billion increase in government spending and $300 billion increase in tax revenue
A
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An explanation for how the price of water can be less than the price of diamonds, even though water is more valuable, is that
a. price is a poor guide to value. b. markets for water and diamonds are not competitive. c. price reflects marginal value, not total value. d. diamond production requires more labor, and value is based on labor.
Nabamitta is a doctor in a foreign country. When she first began medical school the number of doctors in her country was strictly limited by the government
Although the barriers to becoming a doctor were high, she invested nearly a decade of her life attempting to get a license because she knew if she received one she would be assured of a steady stream of patients. Soon after receiving a license, however, her country eliminated all barriers to entry in medical services. The result of the deregulation will likely be _____ for past license holders such as Nabamitta. a. transitional gains b. decreased competition c. transitional losses d. a new regulatory cartel
Most of the LDCs find it difficult to accumulate capital goods because
A. the terms of trade prohibit the inflow of private capital from the advanced nations. B. it is very difficult to restrict consumption in order to free resources for capital goods production. C. domestic monetary policies designed to achieve price stability result in low interest. D. investment is interest inelastic in LDCs.
Which of the following statements is true?
A. The war theory of the business cycle is endogenous. B. The second part of the expansion phase of the cycle is prosperity. C. We have business cycles of different lengths but the same amplitudes.