In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset a recessionary gap resulting from a $1 billion decrease in autonomous consumption, taxes must be:
A. decreased by $1 billion.
B. decreased by $1.33 billion.
C. increased by $1 billion.
D. increased by $1.33 billion.
Answer: B
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In economics, cost is measured as ________, and benefit is measured as ________
A) what you are willing to pay on the margin; what the government pays you when you are unemployed or retired B) the amount of money that you pay on the margin; the amount of money that you receive on the margin C) what you must give up to get something; what you are willing to give up to get it D) the amount of money that you pay for something; the amount of money that someone else is willing to pay you E) what you are willing to give up to get it; what you must give up to get something
The business cycle describes
A) the change in the standard of living across countries. B) the change in potential GDP over time. C) the behavior of real GDP over time. D) the behavior of nominal GDP over time. E) the behavior of GNP over time.
Prices can work to benefit the public interest by
A. raising corporate profit levels. B. improving the fairness of the distribution of income. C. allowing government to regulate the economy. D. allocating scarce resources to those who value the resource the most.
Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:
A. a decrease in the price of pasta, a substitute to bread. B. a decrease in the price of butter, a complement to bread. C. an increase in the cost of flour used in the production of bread. D. a technological advance that lowers the marginal cost of producing bread.