In the Keynesian model, an increase in government purchases affects output by
A. increasing the real interest rate due to crowding out, reducing aggregate demand.
B. increasing aggregate demand as national saving declines.
C. increasing saving to pay for future taxes, lowering the real interest rate and shifting the IS curve to the left.
D. increasing labor supply, because workers feel effectively poorer.
Answer: B
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A key component of the Keynesian model is that
A) people are not fooled by money illusion. B) prices are flexible. C) prices are sticky. D) wages are flexible.
A perfectly competitive market is in long-run equilibrium. Then demand decreases. The decrease in demand leads to
A) a rise in the price in the short run. B) the firms' incurring an economic loss in the short run. C) firms entering the market in the long run. D) none of the above
Rational voter ignorance can lead politicians to: a. favor programs with immediate and clear benefits and unclear and deferred costs
b. fail to take all the benefits and costs of a program fully into account in deciding on which policies to favor. c. do a poor job of overseeing the actions of public sector bureaus. d. all of the above
QN=75 (17802) Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was
a. 96.2. b. 102.0. c. 104.0. d. 152.0.