Describe appropriate discretionary fiscal policy according to Keynesian economics to smooth out the business cycle.
What will be an ideal response?
The government should increase its spending and/or reduce taxes (run a deficit), or increase government spending and taxes by the same amount to combat a recession. The government should do just the opposite to combat inflation during an economic expansion.
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If marginal costs are constant what will the average variable cost curve look like? What about the average total cost curve?
What will be an ideal response?
In a closed economy, an increase in government spending, while taxes remain the same, will be accompanied by
A) a decrease in private investment and an increase in privates saving. B) an increase in private investment and a decrease in private savings. C) a decrease in private investment only. D) an increase in private savings only.
In general, when the price of a fixed factor of production increases:
A. the profit-maximizing level of output increases. B. the profit-maximizing price falls. C. marginal cost increases. D. marginal cost is unchanged.
In Figure 5.8, if the supply curve moves from S1 to S2,
A. the firm will go from making an economic profit to a normal profit. B. the firm will go from making an economic profit to a loss. C. the firm will go from making normal profits to a loss. D. the firm will make a smaller economic profit than they used to.