You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $500 billion. The best estimate he has for the MPC is 0.7. Which of the following policies should you recommend?
A. Decrease government spending by $75 billion.
B. Reduce taxes by $314.3 billion and to decrease government spending by $500 billion.
C. Reduce taxes by $214.3 billion.
D. Reduce the budget deficit by $300 billion.
Answer: C
You might also like to view...
A cost-benefit calculation that focuses on the difference between a feasible alternative and the next feasible alternative is called:
A) marginal analysis. B) market analysis. C) Pareto analysis. D) behavioral analysis.
Dividing the dividend payment by the stock's ________ determines the dividend yield
A) closing market price B) highest yearly price C) coupon payment D) price/earnings ratio
Suppose there is a shortage of computer programmers, but firms refuse to hire unemployed typists and train them. This is one reason for ________ unemployment
A) turnover B) seasonal C) mismatch D) cyclical
When price was 6, quantity demanded was 10. When price decreased to 5, quantity demanded increased to 13. Therefore, when price decreased, total revenue
A. decreased from 65 to 60, indicating that demand is inelastic. B. decreased from 65 to 60, indicating that demand is elastic. C. increased from 60 to 65, indicating that demand is inelastic. D. increased from 60 to 65, indicating that demand is elastic.