Two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment. Jones says that it is better to take a "hands-off" approach. Which of the following is most likely to be true?
A) Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion.
B) Smith and Jones are most likely both classical economists with a few minor differences of opinion.
C) Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist.
D) Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist.
E) none of the above.
D
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A) are both luxury goods. B) are complements. C) are both more inelastic in demand in the long run than in the short run. D) have a positive cross price elasticity of demand.
The national debt
A) decreases with a budget deficit. B) increases with increases in government spending. C) increases with open market purchases by the Federal Reserve. D) increases with a budget deficit.
In the basic Keynesian model, a tax cut:
A. reduces short-run equilibrium output. B. reduces potential output. C. increases short-run equilibrium output. D. increases potential output.
When firms discuss pricing strategies with each other:
A. it is a violation of antitrust laws. B. it is not a violation of antitrust laws because laws cannot restrict free speech. C. it is a violation of antitrust laws only if the discussion includes punishment strategies. D. it is a violation of antitrust laws only if some firms in the industry are excluded from the discussion.