If policymakers cut taxes because they perceive that recession is a major threat, a proponent of the new classical view will be most likely to argue that the tax cut is
a. highly appropriate because it will stimulate aggregate demand and, thereby, help to strengthen the economy.
b. highly inappropriate because it will exert a restrictive impact on aggregate demand, output, and employment.
c. not very important because the "demand stimulus effects" of the tax cut will be largely offset by additional borrowing and higher interest rates.
d. not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future.
D
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Farmers can use their land to grow soy beans or corn. If the price of corn rises,
A) the supply of soybeans decreases and the soybean supply curve shifts leftward. B) the supply of soybeans increases. C) the supply of corn increases and the corn supply curve shifts rightward. D) the supply of corn increases.
Other things equal, when Europeans want to buy more grains from the United States:
a. U.S. imports will increase. b. European exports will increase at every level of domestic income. c. U.S. exports will increase at every level of domestic income. d. the U.S. balance of payments will show a deficit. e. U.S. consumption spending will fall.
Which of the following is likely to be a monopolist?
A.) A potato chip company that sells lots of chips and competes with other chip producers. B.) A farmer who specializes in growing organic fruits and vegetables. C.) The sole producer of a new medical device for people with limited mobility. D.) The chemical company in a small town that employs most of the town's workforce.
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