During an economic contraction, automatic stabilizers:
A. increase both budget surpluses and deficits.
B. reduce a budget surplus or increase a deficit.
C. reduce both budget surpluses and deficits.
D. reduce a budget deficit or increase a surplus.
Answer: B
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
Refer to Figure 4.1. Suppose Alvin chooses Bottom, while Simon chooses Up, and Theodore chooses Right. Alvin's payoff will be
A) 2. B) 6. C) 8. D) 16.
Refer to the table above. If the price of a chair increases to $20 and the rental price of machines is $200 per day, up to how many machines should the firm rent to maximize profits?
A) 2 B) 3 C) 4 D) 5
Which of the following best reflects the ability-to-pay philosophy of taxation?
A. An excise tax on coffee B. An excise tax on gasoline C. A progressive income tax D. A tax on residential property