Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion. To move the economy back to potential GDP, Congress should
A) lower taxes by an amount less than $500 billion.
B) lower taxes by $500 billion.
C) raise government purchases by more than $500 billion.
D) lower government purchases by $500 billion.
E) raise government purchases by $500 billion.
A
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Marginal product is
A) the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. B) total amount of output produced. C) total amount of output produced divided by the quantity of labor employed. D) total amount of output produced divided by price of the output.
In the new Keynesian view a monopolistically competitive firm may fail to increase the price of its product as demand increases because
A) if it does so it will lose all of its customers. B) the cost to it of changing prices may exceed the benefit of doing so. C) prices of monopolistically competitive firms are regulated by the federal government and may only be changed with permission. D) for a monopolistically competitive firm, price is below marginal cost.
Other things the same, an increase in the U.S. interest rate causes
a. demand in the market for foreign-currency exchange to increase so the exchange rate increases. b. demand in the market for foreign-currency exchange to decrease so the exchange rate decreases. c. supply in the market for foreign-currency exchange to increase so the exchange rate decreases. d. supply in the market for foreign-currency exchange to decrease so the exchange rate increases.
A command-and-control approach to government regulation works best when
A. markets can and will produce socially desirable economic outcomes. B. there is significant agreement on the goals, but not on the best ways to achieve them. C. there is significant agreement on the goals and the best ways to achieve them. D. there is significant disagreement on the goals of government regulation.