Suppose a temporary tax cut today is combined with a rise in tax rates on the next generation of taxpayers. This long delay in increasing future taxes would not in itself cause the Ricardian equivalence proposition to fail to accurately predict the effects of the tax cut, unless the
A. parents were far-sighted in their expectations of future tax increases.
B. parents saved the tax cut.
C. parents failed to leave bequests.
D. parents invested the tax cut.
Answer: C
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Assuming that the rational expectations hypothesis is NOT in effect, in the short run an expansionary monetary policy should
A) generate stagflation. B) shift the aggregate supply function. C) increase real Gross Domestic Product (GDP) and the price level. D) increase the rate of unemployment.
In the short run, a firm will stay in business as long as:
a. price equals average revenue. b. marginal revenue is greater than or equal to marginal cost. c. price exceeds average variable cost. d. price is less than average variable cost.
If the government decreases the income tax rate, they assume it will affect which component of GDP?
A. C B. NX C. G D. A change to the income tax rate will not affect any of these components.
Product differentiation that makes the product ________ is known as vertical differentiation.
A. less expensive to produce B. more similar to the rival's product C. better for some consumers and worse for others D. better than a rival's product from everyone's perspective