You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $200 billion. The best estimate he has for the MPC is 0.6. Which of the following policies should you recommend?
A. reduce taxes by $150 billion and decrease government spending by $100 billion
B. increase government spending by $80 billion
C. increase taxes by $133.33 billion
D. reduce the budget deficit by $200 billion
Answer: B
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If Wendy can produce more of all goods than Tommy in an hour, then
A) Wendy has an absolute advantage in all goods. B) Wendy does not need to trade with Tommy in order to achieve the gains from trade. C) Wendy has a comparative advantage in all goods. D) Tommy has an absolute advantage in all goods. E) Only Tommy but not Wendy can benefit from trade between the two of them.
A decrease in the quantity of available resources would be represented by:
a. a steeper PPC. b. a point inside the PPC. c. an inward shift of the PPC. d. an upward movement along the PPC. e. a downward movement along the PPC.
Which of the following transactions would impact the net transfers in the U.S. balance of payments?
a. The Mexican government sells bonds to U.S. residents. b. A Mexican firm hires an American accounting firm. c. The U.S. government buys jet engines from a Mexican manufacturer. d. A U.S. resident sends a gift of money to his mother living in Mexico.
The interest rate at which the present value of costs equals the present value benefits is the
A. coupon interest rate. B. internal rate of return. C. yield to maturity. D. market interest rate.