Refer to the graph shown. If the economy is at point D, which of the following policies is most appropriate to bring the economy to potential?
A. Increase in taxes
B. Cut in government spending
C. Cut in taxes
D. No change in taxes or government spending
Answer: C
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If the government decreased income taxes by $500 billion and does not pursue a policy change, which of the following would require the private sector to adjust in order to finance the tax decrease?
A) Increase other taxes by $500 billion. B) Reduce transfer payments by $500 billion. C) Reduce expenditures on programs such as education or defense by $500 billion. D) Issue $500 billion in new Treasury Bonds.
In POW camps during World War II, nearly everything was traded for cigarettes. For example, one bar of soap cost two cigarettes, and two candy bars cost four cigarettes. During the time of the POW camps, cigarettes:
A. served as money for those who smoked. B. did not serve as money because their value was not backed by government. C. served as money because they served as a unit of account, medium of exchange, and store of wealth. D. did not serve as money because no one controlled the supply of cigarettes.
If GDP exceeds GNP, we know with certainty that
A) a budget deficit exists. B) a trade surplus exists. C) a trade deficit exists. D) receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world.
Which of the following is TRUE of the Federal Reserve System?I.It was established in the early 1980s.II.It serves as the central bank of the United States.
A. I only B. II only C. Both I and II D. Neither I nor II