During which time will fiscal policy be the most effective?
A) normal times
B) times of war
C) in the middle of expansions
D) times of stagflation
Answer: B) times of war
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Since the late 1970s, China's growth rate in real GDP per capita has been more than 3.5 times higher than that in the United States. Much of China's growth is likely due to the transition from a communist economy to a market economy
This transition is equivalent to A) moving China's balanced growth path higher. B) returning China to its original balanced growth path. C) increasing China's balanced growth path to a level 3.5 times greater than the balanced growth path in the United States. D) reducing China's balanced growth path to compensate for the increase in real GDP per capita.
Shin likes to spend a (relatively small) portion of his income on vacations to Cabo San Lucas (a popular resort area in Mexico)
On these trips, he either stays at a four star resort with panoramic ocean views or a more modest, and slightly deteriorating hotel in the noisy part of town. Understandably, the four star hotel is significantly more expensive. Suppose that the four-star hotel costs $5000/trip while the hotel costs just $500/trip. In recent years, the price of airfare has risen significantly, a change that effects the cost of his trips the same regardless of where he stays. Suppose that airfare has increased from $300/trip to $1000/trip. Why is it that following the higher travels prices, Shin is likely to spend more of his vacations at the four star resort when he travels. (Assume that the hotel rates and Shin's preferences are fixed).
The adaptive expectations hypothesis implies that people:
a. adjust their expectations quickly to policy changes. b. expect the next period to be pretty much like the recent past. c. will always be correct in their forecast for the next period. d. change their expectations about the future if policy changes.
When transactions costs are low, private actions to correct externalities are usually feasible
a. True b. False