Which one of the following is an area of continued disagreement among modern macroeconomists with regard to the use of fiscal policy?
a. Automatic stabilizers help reduce the fluctuations in aggregate demand and output.
b. It is difficult to time changes in discretionary fiscal policy in a manner that will promote stability.
c. Fiscal policy is much less potent than the early Keynesian view implied.
d. Budget deficits are a highly effective tool with which to combat a severe recession.
D
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If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP, then
A) the economy is in an expansion. B) actual inventory investment will be less than planned inventory investment. C) actual inventory investment will be greater than planned inventory investment. D) the economy is at full employment.
Other things constant, countries with higher investment rates will
What will be an ideal response?
Nations that borrow from abroad to support current investment will
A) always sacrifice future consumption. B) sacrifice future consumption only if the investments are profitable. C) always be better off in the future. D) be better off in the future if the investments are profitable.
The reason that average labor costs are higher in the United States than in Haiti is that
A) workers are more productive in the United States. B) U.S. workers have a comparative advantage. C) Haitian workers have a comparative advantage. D) Haitian workers do not have union representation.