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
C. $5 billion
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An economy is judged efficient if
A. it is good at producing what people want. B. it produces things that people may not want but in the least wasteful way. C. produces whatever people want in a way that may not be the least wasteful. D. it is a free-market economy and not a command market.
Which of the following is an example of expansionary fiscal policy?
A. Increase taxes. B. Decrease government spending. C. Increase government spending. D. Increase taxes and decrease government spending equally.
An increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to:
A. increase. B. decrease. C. either increase or decrease. D. remain constant.
Suppose the value of price elasticity of demand for goods manufactured by firms A, B, C, and D are 0, -0.8, -1, and -1.5 respectively. The demand for the good will be elastic for:
a. firms A, B, C, and D. b. firms B, C, and D. c. only firm A. d. firms C and D only. e. only firm D.