Assuming that the government can act immediately before the multiplier takes effect, then to offset a reduction in investment by $1 billion, government purchases must be:
A. decreased by $1 billion.
B. increased by $1 billion.
C. increased by $2 billion.
D. increased by $0.5 billion.
Answer: B
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If a monopolist is producing at the profit-maximizing level of output, what price will it charge?
a. The price given by the marginal-revenue curve at that level of output. b. The price given by the marginal-cost curve at that level of output. c. The price given by the average-cost curve at that level of output. d. The price given by the average-revenue curve at that level of output. e. The price given by the total revenue curve at that level of output.
Economists generally use gross domestic product to measure a nation's total output because it
a. equals the sales value of all transactions conducted during a period and, thus, can be easily calculated. b. is the best available measure of the market value of all final goods and services produced during a period. c. is unaffected by changes in the prices of products over time. d. is a reliable indicator of the social progress of a nation over time.
When the economy heads into a recession, automatic stabilizers cause
A. taxes and government spending to rise. B. the government budget deficit to increase. C. taxes and government spending to fall. D. national income to increase.
Some argue that Sweden's generous welfare benefits, which pay people who lose their jobs as much as 80 percent of previous incomes for three years, has resulted in too-high unemployment. This can be seen as an example of:
A. government not correcting externalities produced by the market. B. globalization causing hardworking youth to emigrate. C. market failure due to unfair conditions produced by the labor market. D. government failure in fostering a competitive market environment.