The permanent income hypothesis implies that the effect of a temporary tax cut on economic activity
A) is greater than the effect of a permanent tax cut.
B) is the same as the effect of a permanent tax cut.
C) is smaller than the effect of a permanent tax cut.
D) can be greater than or smaller than the effect of a permanent tax cut, depending on how the tax cut affects the government.
C
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Refer to Figure 10.4. Suppose the economy's equilibrium starts out with an output gap of 1, and real GDP increases so the output gap increases to 2
If the Fed keeps the money supply constant, money demand will ________ and the nominal interest rate will ________. A) increase; increase B) increase; decrease C) increase; remain constant D) remain constant; remain constant
The above figure depicts the Edgeworth box for two individuals, Al and Bruce. The contract curve can be found by connecting points
A) a and b. B) a and c. C) b and d. D) c and d.
Suppose Danielle receives the highest grade in the class on the first exam in her economics course. Regression to the mean implies that Danielle:
A. is likely to get an A in the class. B. isn't likely to do as well on the second exam. C. is likely to do even better on the second exam. D. is unlikely to forget the material she studied for the exam.
Securities sold in financial markets change value ______.
a. based on government mandates b. based on investor expectations c. when the board sets their price d. in coordination with similar firms