Both the crowding-out effect and new classical model indicate that
a. expansionary fiscal policy is a highly effective weapon with which to fight an economic downturn.
b. restrictive fiscal policy is a highly effective weapon with which to control inflation caused by excess demand.
c. there are side effects of budget deficits that will substantially, if not entirely, offset their expansionary impact on aggregate demand.
d. fiscal policy can be used effectively to restrain inflation but it is largely ineffective as a weapon against recession.
C
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The short-run shutdown price for a perfectly competitive firm is where price equals
A) minimum ATC. B) AR. C) MR. D) minimum AVC.
The bulk of exports from non-industrial countries are
a. manufactured goods b. primary products c. agricultural goods d. natural resources e. raw sugar products
Using Figure 2 below, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE1 might be:
A. wealth level decreases.
B. interest rates decrease.
C. expected profitability of investments increase.
D. domestic income decreases.
The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm:Q = a + bP +cM +dPRwhere Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below: Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30. At the prices and income given above, what is the income elasticity?
A. 0.21 B. 0.31 C. -1.62 D. 1.50 E. -0.87