According to advocates, counter cyclical policies ________.
A) lead to hyperinflation
B) lower output below its potential level
C) increase the intensity of economic fluctuations
D) smooth the rate of growth of the economy over time
Answer: D) smooth the rate of growth of the economy over time
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In an economy where aggregate spending is given by Y = 3,000 + .75Y - 10,000 r, the central bank is currently setting the interest rate at 0.06 (6 percent). If potential output equals 9,500, the central bank must ________ the interest rate to close the ________ gap.
A. raise; expansionary B. lower; recessionary C. lower; expansionary D. raise; recessionary
The manager of a car manufacturing factory assigns workers different tasks based on their skills. He assigns some workers the task of designing cars and some the task of testing cars. Which of the following is true in this scenario? a. This is an example of specialization of labor
b. This is likely to increase the average cost of producing a car. c. This is likely to decrease the profit of the factory. d. This is likely to lead to the privatization of the factory.
A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is
A. An example of a public good. B. An example of government failure. C. Included in the market price of cigarettes. D. An example of externality costs.
Incentive problems in contractual relationships generate
A. costs that decrease value. B. costs that increase value. C. revenues that increase value. D. revenues that decrease value.