Government intervention can serve to stabilize the macro economy by
A. Regulating monopolies and encouraging the equitable distribution of output.
B. Reducing inflation and encouraging economic growth.
C. Reducing employment and encouraging economic growth.
D. Reducing inflation and encouraging the equitable distribution of income.
Answer: B
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When output is below the full employment level of real GDP, the Federal Reserve banks should ________.
A. sell bonds B. raise the federal funds rate C. raise the discount rate D. lower the reserve ratio
Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment
A) taxes; the money supply B) taxes; interest rates C) taxes; expenditures D) interest rates; money supply
Economics is called an empirical science because
A) economists study real-world evidence to test their models. B) economists use assumptions in their models. C) economic models have no predictive power. D) economic analysis is only useful in a capitalistic society.
Recently the price of lentil beans increased. As a result Lincoln residents noticed that their neighbor, Rasputin, increased his consumption of lentils and decreased his consumption of steak. Rasputin said his utility had declined. Many citizens made donations to the "Rasputin Relief Fund." Rasputin was given a cash grant equal to the amount he claimed to need to regain his initial utility level. Happy and thankful, Rasputin rushed off to the store to make his new purchases. Each graph above shows two indifference curves for Rasputin, I1 and I2, and the two budget constraints, B1 and B2, that he faced. Let E1 represent Rasputin's initial equilibrium, E2 equal his equilibrium following the increase in the price of lentils, E3 his equilibrium after receiving the cash from the relief fund. Wh
A. Graph A
B. Graph B
C. Graph C
D. Graph D