A tax on the sellers of coffee mugs
a. increases the size of the coffee mug market.
b. decreases the size of the coffee mug market.
c. has no effect on the size of the coffee mug market.
d. may increase, decrease, or have no effect on the size of the coffee mug market.
b
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The concept of "rational expectations" is consistent with the notion of
a. utility maximization. b. profit maximization. c. strong mechanisms towards equilibrium in markets d. auction markets. e. all of the above.
Assume that an economy's income multiplier is 2 and that this economy is in equilibrium at $500 billion. If the government wants to move this economy to full-employment at $600 billion, while maintaining a balanced budget, it must choose which of the following options?
a. increase government spending and taxes by $100 billion b. decrease government spending and taxes by $100 billion c. increase government spending and taxes by $200 billion d. decrease government spending and taxes by $200 billion e. raising the equilibrium level of income while maintaining a balanced budget is impossible
If aggregate spending in an economy can be written as Y = 15,000 + 0.6Y - 20,000r, and potential output equals 35,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?
A. 5 percent B. 4 percent C. 2 percent D. 3 percent
Exhibit 20-6 Money, investment and product markets
?
In Exhibit 20-6, if the Fed believes the economy is at AD3, how might it engineer a decline in the price level?
A. By decreasing the money supply, the interest rate falls, investment rises, and aggregate demand falls, causing the price level to fall. B. By decreasing the money supply, the interest rate rises, investment rises, and aggregate demand rises, causing the price level to fall. C. By decreasing the money supply, the interest rate rises, investment falls, and aggregate demand falls, causing the price level to fall. D. By increasing the money supply, the interest rate rises, investment rises, and aggregate demand falls, causing the price level to fall.