Transfer payments typically
A) rise during expansionary periods.
B) fall during recessions.
C) do not change as the economy expands and contracts during the business cycle.
D) fall during expansionary periods and rise during recessionary periods.
Answer: D) fall during expansionary periods and rise during recessionary periods.
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Faster economic growth in the United States may lead to the serious macroeconomic problem of higher
a. levels of unemployment. b. federal budget deficits. c. levels of inflation. d. levels of poverty.
Suppose the people of Florencia spend $60 and save $40 for every $100 they earn. In this case, the marginal propensity to save equals _____
a. 0.2 b. 0.7 c. 0.4 d. 0.8
When existing firms in a competitive market are profitable, an incentive exists for
a. new firms to seek government subsidies that would allow them to enter the market. b. new firms to enter the market, even without government subsidies. c. existing firms to raise prices. d. existing firms to increase production.
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