Refer to the above figure. Suppose the U.S. economy is currently operating at point C. Which of the following actions would you recommend to the president of the United States?
A. Engage in contractionary fiscal policy by raising income taxes.
B. Raise government spending to stimulate investment, consumption and net exports.
C. Reduce the interest rate to stimulate investment minimizing the crowding out effect.
D. Increase government spending while holding taxes constant.
Answer: A
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Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC abide by the agreement, then OPEC's profit will be $200 million and Mexico's profit will be $100 million. If both Mexico and OPEC cheat on the agreement, then OPEC's profit will be $175 million and Mexico's profit will be $80 million. If only OPEC cheats, then OPEC's profit will be $185 million, and Mexico's profit will be $60 million. If only Mexico cheats, then Mexico's profit will be $110 million, and OPEC's profit will be $150 million. You may find it helpful to fill in the payoff matrix below. src="https://sciemce.com/media/4/ppg__rrr0818190951__f1q239g1.jpg" alt="" style="vertical-align: 0.0px;" height="203" width="377" />Which of the following statements is correct?
A. OPEC's dominated strategy is to cheat on the agreement.
B. OPEC's dominant strategy is to cheat on the agreement.
C. OPEC does not have dominant strategy.
D. OPEC's dominant strategy is to abide by the agreement.
Real business cycle theory explains variations in prices, employment, and real Gross Domestic Product (GDP) by focusing on
A) changes in real variables such as supply shocks, technological changes, and shifts in the composition of the labor force. B) anticipated changes in fiscal policy enacted by the government. C) the effects of the Phillips curve. D) anticipated monetary policies enacted by the Fed.
Once you buy a coupon bond, which of the following can change?
A. Coupon payment B. Coupon rate C. Yield to maturity D. Face value
If the MPC = 0.90, the total change in spending resulting from an initial $200 increase in aggregate spending will be
A. $200. B. $2,000. C. $180. D. $1,800.