If there is initially a federal budget deficit, and taxes fall while transfer payments rise:
a. there is an indeterminate effect on both AD and the budget deficit.
b. AD increases and the budget deficit increases
c. AD increases and the budget deficit decreases.
d. AD decreases and the budget deficit increases.
b
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The question of how people's behavior changes in response to taxes:
A. has been studied and is well known today. B. is the subject of much research. C. was generally accepted and has recently come under examination again. D. None of these statements is true.
The graph above represents a(n):
A. decreasing-cost industry: firms may be paying lower prices for their inputs when the industry expands. B. increasing-cost industry: firms may be paying higher prices for their inputs when the industry expands. C. constant-cost industry: prices of the inputs stay the same, and other production costs are constant as the industry expands. D. competitive, break-even industry: the long-run supply curve is upward sloping as it must be according to the law of supply.
In the Keynesian model, the government can respond to a recessionary or inflationary gap by:
A. changing the quantity of money. B. relying on the spending multiplier to generate a change in real GDP that is a multiple of the change in autonomous spending. C. changing autonomous spending
The central prediction of the Hecksher-Ohlin theorem is that
a) international goods prices equalize under foreign trade b) comparative advantages depend on the abundance of factor inputs c) international trade disperses technology, speeding convergence d) all nations move beyond their production possibilities sets with free trade e) exchange rates adjust to ensure purchasing power parity