How does an increase in government transfer payments affect aggregate demand?
A. It has the same effect as a tax increase, which lowers AD with a larger multiplier than a spending decrease.
B. It has the same effect as a tax cut, which increases AD but with a smaller multiplier than a change in spending.
C. It has the same effect as a spending increase, which increases AD with a larger multiplier than a tax cut.
D. It has the same effect as a spending decrease, which increases AD with a larger multiplier than a spending decrease.
Answer: B
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What incentives would have changed? How might the changed incentives have changed the choices that people made?
According to economic theory, the real wage should
a. be greater than the price of the product produced. b. equal the marginal physical product of labor. c. be less than the marginal product of capital. d. decline as productivity rises.
An increase in the reserve requirement from 20 percent to 25 percent is most likely to:
a. reduce total deposits in the banking system. b. reduce excess reserves and the deposit expansion multiplier. c. increase the money supply. d. reduce the amount of reserves required. e. increase total deposits and the deposit expansion multiplier.
A mathematical summary of inequality based on the Lorenz curve is known as the
A. Income distribution share. B. Gini coefficient. C. Okun coefficient. D. Lorenz coefficient.