"Last month unemployment fell to 4 percent, its lowest level in years. The economy is growing rapidly, but consumer prices have risen at an annual rate of 10 percent during the last six months." Which of the following policies would be most appropriate under these circumstances?
a. An increase in both government spending and taxes.
b. An increase in taxes.
c. A reduction in taxes.
d. An increase in government spending.
b
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If technological change is "neutral," then
A) output per worker declines, output per unit of capital increases. B) "effective labor input" increases, output per unit of capital declines. C) output per worker increases, output per unit of capital is constant. D) Both output per worker and output per unit of capital change.
With inflation of 5 percent, real GDP growth of 3 percent, and an outstanding national debt of $3400 billion, the "allowable deficit" that holds the debt-GDP ratio constant is
A) $272 billion. B) $68 billion. C) $170 billion. D) $175.1 billion. E) $510 billion.
In the simple Keynesian model, if there is an autonomous investment falls by $20 billion and the MPC (b) is 0.60, the equilibrium income level will increase by
a. $13.3 billion. b. $20 billion. c. $50 billion. d. $100 billion.
Why is the short run labor demand curve less elastic relative to the long run labor demand curve?
A. Labor is a normal good. B. Isoquant lines get shallower when the wage increases. C. Firms care about changes in wages in the short run but not in the long-run. D. A perfectly competitive firm can always pay lower wages in the long run. E. Firms are better able to substitute capital for labor in the long run compared to the short run.