Suppose the economy is initially operating at full employment. A fiscal policy action that results in an increase in the size of the budget deficit will cause which of the following in the long run?
A) an increase in real GDP.
B) have no effect on both the level and composition of real GDP.
C) a reduction in the price level.
D) change the composition of real GDP.
D
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Refer to Figure 14.3. To maximize total wages paid to workers, the labor union will agree to wage rate:
A) W0. B) W1. C) W2. D) W3. E) none of the above
The efficiency of the payments’ mechanism affects
A. the speed with which money can be exchanged for other assets. B. how quickly individual loan applications will be approved. C. how slowly individuals deplete their cash balances. D. the speed with which financial institutions can process checks and other funds.
Economists use the percentage change in quantity rather than the absolute change in quantity because:
A. the measured elasticity is the same regardless of the unit of measurement for quantity. B. absolute changes are confusing to convert. C. absolute changes often result in negative numbers. D. percentage changes are easier to calculate than absolute changes.
The CPI somewhat overstates changes in the cost of living because it does not allow for substitutions that consumers might make in response to price changes.
Answer the following statement true (T) or false (F)