You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The Chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $300 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?
A. Increase government purchases by $60 billion.
B. Increase government purchases by $150 billion.
C. Cut taxes by $60 billion and to increase government purchases by $60 billion.
D. Cut taxes by $60 billion.
Answer: A
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The term "business cycle" refers to ________
A) the opening and eventual closing down of businesses B) the rising and later declining of the purchasing power of the dollar C) the acquiring of raw materials and ultimate selling of a finished product D) the tendency for rich economies to be inevitably out-paced by other economies E) the slowing and eventual accelerating of economic growth
Behavioral game theory assumes
A) people act rationally. B) people are subject to biases that cause them to act irrationally. C) that people behave differently when playing games than when "playing for real." D) people optimize using all available information.
The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?
a. 1.6 percent b. 4.9 percent c. 6.82 percent d. 11.4 percent
When the Fed decreases the money supply, interest rates:
A. rise. B. fall. C. are unaffected. D. rise and then fall.