Which of the following best describes the impact of fiscal policy during the Great Depression?
a. Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand.
b. Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget.
c. It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II.
d. There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.
C
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Suppose the auto industry has several investment projects with an expected rate of return of 15 percent, the aluminum industry has projects with an expected return of over 20 percent,
the publishing industry projects with an expected return of 10 percent, the steel industry has projects with an expected return of 7 percent and the rubber industry projects with an expected return of 5 percent. The current market rate of interest is 7 percent. A reduction in the supply of funds causes interest rates to rise to 11 percent. The effect is to A) cause the firms in the steel and publishing industries to cancel their projects, which would have been funded at the old interest rate. B) cause the firms in the steel and the rubber industries to go ahead with their projects. C) force the firms in the automobile industry and the publishing industry to rely on funding their projects through other means. D) make the projects of the aluminum industry and the steel industry unprofitable; the firms in these industries will not borrow the funds or make the investments.
Which of the following statements best describes possibilities for trade?
a. Many larger national economies around the world, in regions like North America and Western Europe, have much more limited possibilities for trade inside their countries or their immediate regions. b. Many smaller national economies around the world, in regions like Latin America, Africa, the Middle East, and Asia, have much more limited possibilities for trade inside their countries or their immediate regions. c. Many medium national economies around the world, in regions like Latin America, Africa, the Middle East, and Asia, have much more limited possibilities for trade inside their countries or their immediate regions. d. Many smaller national economies around the world, in regions like Eastern Europe, have much more limited possibilities for trade inside their countries or their immediate regions.
As relative prices in various industries change due to trade, the marginal product of the mobile resources used in the expanding industry __________, and the marginal product of the mobile resources used in the contracting industry __________.
a. rises; falls b. falls; rises c. remains the same; remains the same d. changes by exactly the same percentage; changes by exactly the same percentage
If quantity demanded for sneakers falls by 6 percent when price increases 20 percent, we know that the absolute value of the own price elasticity of sneakers is:
A. 2.3. B. 0.3. C. 0.7. D. 3.3.