Refer to the above diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it would be appropriate for the government to:
A. increase government expenditures or reduce taxes.
B. reduce government expenditures or increase taxes.
C. reduce government expenditures and taxes by equal-size amounts.
D. reduce unemployment compensation benefits.
Answer: A
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According to this Application, in exchange for the federal government absolving their debts, the states were willing to give up their ability to raise revenue from collecting
A) property taxes. B) income taxes. C) import tariffs. D) all of the above.
Assume there is an increase in demand in a perfectly competitive market that was initially in long-run equilibrium. Which of the following statements is false?
A) Consumers have shown that they now consider the good to be more valuable. B) In the short run, profits will be lower than normal. C) Resources from other industries will be attracted into the market. D) Over time, the market supply curve will shift right.
Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely:
A. ignore this merger because of the relatively small increase in the Herfindahl index. B. allow the merger but watch the new firm carefully for future violations of the antitrust laws. C. allow the merger if foreign entry to the industry is possible. D. prevent the merger, contending that it violates the Clayton Act.
Supply-side theory asserts that high marginal tax rates
A. raise additional tax revenues. B. encourage private saving. C. encourage business investment. D. discourage work effort.