If the rural wage is 4 and the formal urban wage rate is 10, there will be rural to urban migration if the formal urban unemployment rate is
(a) 50%
(b) 60%
(c) 70%
(d) all of the above
A
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Suppose the economy is in equilibrium when business firms decide to increase investment spending by $100 billion. According to the short-run macro model, what would be the effect on equilibrium real GDP?
a. There would be no effect; the increased investment spending would be offset by decreased spending in other sectors. b. It would increase by $100 billion. c. It would increase by more than $100 billion. d. It would increase, but by less than $100 billion. e. It would decline by $100 billion.
In addition to open market operations and the required reserve ratio, another tool of monetary policy available to the Fed is
A. fiscal policy. B. government spending and various transfer-payment programs. C. the difference between the discount rate and the federal funds rate. D. tax rates and the progressivity of the income-tax system.
If the MPC is 0.80, all taxes are lump-sum taxes, and the equilibrium GDP is $25 billion below the full-employment GDP, then the size of the recessionary expenditure gap is:
A. $2 billion B. $4 billion C. $5 billion D. $6 billion