How does the slope of the AS curve affect the closure of the GDP gap?
What will be an ideal response?
The AS curve is typically upward-sloping. A shift in AD will cause a change in the level of output but also a change in the price level. In this case AD must shift by a distance greater than the GDP gap in order to close the gap. If the AS curve is horizontal, as in a deep recession, a shift in AD by the amount of the GDP gap will close the gap because there is no change in the price level.
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Over twenty years ago the city of Washington D.C. was facing a budgetary shortfall. In a plan to increase tax revenue the mayor and city council agreed to raise the excise tax on gasoline
Typically for goods like gasoline which are price inelastic this should have led to an increase in tax revenue. However, just the opposite happened – tax revenue plummeted! What could explain this seemingly paradoxical result?
Net national product + ________ = ________
A) net interest; gross domestic product B) depreciation; gross national product C) depreciation; private disposable income D) private disposable income; gross national product E) none of the above
One productivity standard for income distribution stated in the text is
A) income distribution should be based on contribution to society's total output. B) tax payments are higher for higher income people. C) poor people pay too much in taxes. D) the poor should contribute more to society.
A demand curve with an elasticity of 1.0 is a unit-elastic demand curve
a. True b. False Indicate whether the statement is true or false