Assume the economy is initially in equilibrium with real GDP equal to potential GDP
Other things equal, if the economy enters a recession and there are no automatic stabilizers, the IS curve would shift to the ________, and the shift would be equal to ________. A) right; decline in investment spending
B) left; decline in investment spending
C) right; decline in investment spending times the multiplier
D) left; decline in investment spending times the multiplier
D
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Under a flexible exchange rate, an increase in the domestic money supply leads to
A) a devaluation of the domestic currency. B) a revaluation of the domestic currency. C) a depreciation of the domestic currency. D) an appreciation of the domestic currency.
Under perfect capital mobility
a. there are no restrictions on buying financial assets, though there may be on buying factories and equipment. b. transactions costs have to be zero. c. differential risk in assets across countries are minimal. d. All of the above e. None of the above
Two factories make wooden chairs. If the workers in factory A make each chair from start to finish and the workers in factory B divide labor, one would assume
A) the chairs in factory A are of higher quality. B) the workers in factory B have more job satisfaction. C) factory B can take advantage of division of labor and produce more efficiently. D) factory A can take advantage of division of labor and produce more efficiently.
In which of the following examples is excess burden not present?
A. Harriet decides to give up her Saturday hours at her law office after income tax rates rise. B. Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. C. Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. D. Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.