Answer the following statements true (T) or false (F)
1) If government decreases its purchases by $20 billion and the MPC is .8, equilibrium GDP will
decrease by $100 billion.
2) If the MPC is .9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.
3) A recessionary expenditure gap in a mixed open economy can be measured as the extent to
which aggregate expenditures (C a + I g + X n + G) fall short of real GDP at the full-employment
level of real GDP.
4) The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-
employment GDP differ.
1) T
2) F
3) T
4) F
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Price elasticity of supply is defined as
A) the quantity supplied divided by the quantity demanded. B) the change in the quantity supplied divided by the change in the quantity demanded. C) the percentage change in the quantity supplied divided by the percentage change in price. D) the percentage change in the quantity supplied divided by the percentage change in the quantity demanded.
Either a dual or hierarchial mandate is acceptable as long as ________ is the primary goal in the ________
A) price stability; short run B) price stability; long run C) reducing business-cycle fluctuations; short run D) reducing business-cycle fluctuations; long run
Wealthy country A enters into a free trade agreement with poor country B. Country B improves its productivity. Country A pays lower prices for goods imported from poor country B. However, Samuelson expresses concern that these lower prices may not offset possible ______ in wealthy country A.
Fill in the blank(s) with the appropriate word(s).
Bob is not considered unemployed if he
A. is temporarily laid off. B. is not working but has looked for a job for the past two months. C. is not looking for a job. D. all of the above.