Suppose that real GDP is initially $100 trillion and the government attempts to increase real GDP to $101 trillion. The marginal propensity to consume is 0.75, and every $1.00 increase in real government spending crowds out $0.50 in real planned investment expenditures. How much increase in real government spending could lead to the desired level of real GDP?
A. $500 billion
B. $0
C. $250 billion
D. $100 trillion
Answer: A
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A long run equilibrium: a. Will be at a greater output level than the natural level of real output. b. Will be at the natural level of real output
c. Will be at a smaller output level than the natural level of real output. d. Long-run equilibrium could be at any of the above levels of output.
The total volume of business sales in our economy is several times as large as the GDP because:
A. the GDP excludes intermediate transactions. B. the GDP grossly understates the value of our annual output. C. the GDP does not take taxes into account. D. total sales are in money terms and GDP is always stated in real terms.
If profits depend on both how much is produced (output) and the level of quality, then a profit-maximizing firm should choose the levels of output and quality at which
A. The marginal revenue of quality exceeds the marginal cost of quality by the largest amount. B. The marginal revenue of output exceeds the marginal cost of output by the largest amount. C. The difference between the addition to total revenue and the addition to total cost of the last units of output and quality is the greatest. D. both a and b E. none of the above
The earned income tax credit goes to
A. low-income working people. B. non-working poor people living off of government assistance. C. the retired. D. all taxpayers regardless of income.