If the economy has an inflationary GDP gap, one possible solution is to increase taxes.
Answer the following statement true (T) or false (F)
True
An increase in taxes will decrease consumers' disposable income, thus shifting the AD curve to the left. The fiscal policies available to the federal government for decreasing aggregate demand are to decrease government spending, increase taxes, or decrease transfer payments.
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If the labor demand curve shifts to the right due to a government policy during a recession, and if wages are flexible, ________
A) real wages will increase B) real wages will decrease C) prices will fall D) unemployment will increase
After trading in her Volkswagen Beetle for a much safer Mercedes sedan, Rene began driving less carefully. This is an example of: a. adverse selection
b. free-riding. c. moral hazard. d. Positive externalities.
Which of the following assumptions of the classical model is the best reason we cannot use it to explain short-run economic fluctuations?
a. Markets never clear in the long run. b. The labor market clears. c. Prices remain constant and supply and demand adjust. d. It does not show how an economy recovers from a recession. e. Government intervention is essential to get markets to clear.
Which factor of production receives the greatest share of the U.S. national income?
a. land b. labor c. capital d. entrepreneurship