Smoothing the peaks and troughs of the business cycle with fiscal policy is
A. difficult, because the government lacks important information about the economy.
B. difficult, because economists have not developed any theoretical models of the macroeconomy.
C. relatively simple, because the political process usually works smoothly and without significant lags.
D. relatively simple, because the government has access to the best information available.
Answer: A
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According to Okun's Law, if the natural rate of unemployment is 5% and the actual unemployment rate is 4%, what is the level of full-employment output if output equals $10,125 billion?
A) $10,328 billion B) $10,226 billion C) $10,025 billion D) $9926 billion
Figure 5.1 provides support for the Fisher effect, by ________
A) displaying a positive relationship between the inflation rate and the nominal interest rate B) showing how developed economies like the U.S. and Japan have less inflation than economies like Turkey and Indonesia C) focusing on short-run fluctuations, rather than long run averages D) plotting observed, rather than expected inflation E) showing that output is unaffected by changes in the money supply
Which of the following contributed the most to the economic stability and strong growth of real GDP during the 1980s and 1990s?
a. the rapid growth of government expenditures throughout most of the period b. congressional policies that persistently balance the budget c. modifications in fiscal policy that stimulated aggregate demand during economic slowdowns and restrained it during periods of economic boom d. Federal Reserve policies that kept the inflation rate low and relatively stable
If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:
A. the opportunity cost of producing bicycles in the United States is higher than in Japan. B. Japan has a comparative advantage in the production of bicycles. C. total output will be highest if Japan specializes in rice and the United States specializes in bicycles. D. total output will be highest if the United States specializes in rice and Japan specializes in bicycles.