Refer to Figure 13-4. Given the economy is at point A in year 1, what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?
A) 0.3% B) 1.1% C) 2.7% D) 3.7%
C
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Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ________ as well as aggregate demand and that fiscal policy is ________.
A. consumption; offset by automatic stabilizers B. potential output; not flexible enough C. potential output; offset by automatic stabilizers D. consumption; too flexible
Answer the following statement(s) true (T) or false (F)
1. An efficiency wage is the wage that maximizes the surplus of the worker. 2. Stockholders can use high levels of compensation and substantial severance payments to get their corporate executives to take on higher levels of risk. 3. A golden parachute is a mechanism that stockholders employ to encourage executives to be more risky than they would be without the parachute. 4. Stock options create the wrong incentive in that they create a principal-agent problem. 5. An unexpected increase in inflation, by diluting the informational content of prices, will lead to an increase in unemployment.
The data in the above table show that when the price level is 120, if aggregate demand does not change then the
A) money wage rate will rise in the future. B) money wage rate will fall in the future. C) short-run aggregate supply curve will shift leftward. D) long-run aggregate supply curve will shift leftward.
Real GDP measures the ________ of production.
A. change in the volume B. current dollar value C. current market value D. physical volume