If the government cuts taxes today, issuing debt today and repaying the debt plus interest next year, a rational taxpayer will
A. increase saving today, leaving consumption unchanged.
B. spend the full amount of the tax cut today and reduce consumption next year.
C. increase consumption today, before taxes go up next year.
D. leave a smaller gross bequest to her or his heirs.
Answer: A
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When a firm’s fixed cost rises, its total profit curve shifts
A. up at every output level. B. down at every output level. C. left at every profit level. D. right at every profit level.
The Case in Point titled "Velocity and the Confederacy" suggests that during the Civil War, the South faced
A) hyperinflation and rising velocity. B) hyperinflation and falling velocity. C) deflation and rising velocity. D) deflation and falling velocity.
How does the new classical theory of fiscal policy differ from crowding-out model?
Other than following a rule, a country could do each of the following things to help its central bank achieve credibility except
A. increase central bank independence. B. put the central bank under the government's control. C. appoint a tough central banker. D. change the incentives of the central bankers.