Automatic fiscal policy ________
A. requires an action of the government
B. is weak unless the government cuts its outlays to reduce the deficit
C. operates as the economy moves along its business cycle
D. reduces the deficit as the economy goes into recession
C Answer C is essentially the definition of automatic fiscal poli-cy.
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Wealthy people are more likely than poor people to use airplanes rather than busses for interurban travel because
A) their demand for transportation is more elastic. B) their demand for transportation is more inelastic. C) they can better afford to use a higher-cost mode of transportation. D) they are more likely to ignore the relative costs of busses and airplanes. E) traveling by airplane usually costs them less than traveling by bus.
In which model does there exist a tradeoff between higher inflation and lower unemployment?
a. monetarist b. real business cycle. c. new classical d. a and b. e. a tradeoff exists in all of the above.
The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises. However, the quantity of bananas demanded in the U.S. tends to decrease as income rises
Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas: A) rightward B) no shift. C) leftward. D) upward.
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and GDP Price Index rises. b. The real risk-free interest rate falls, and GDP Price Index falls. c. The real risk-free interest rate rises, and GDP Price Index falls. d. The real risk-free interest rate and GDP Price Index remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.