Keynes believed
A. once a recession began, it would always turn into a depression.
B. full employment GDP was a rare occurrence.
C. the expected profit rate and the interest rate were equally important in determining the level of investment in an economy.
D. inflation was a persistent tendency of the economies of his day.
B. full employment GDP was a rare occurrence.
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When domestic and foreign currency bonds are imperfect substitutes, the domestic interest rate (R) can be written as
A) R = R - (Ee - E)/E + ?. B) R = R - (Ee - E)/E. C) R = R + (Ee - E)/E + ?. D) R = R - (Ee + E)/E + ?. E) R = R - (Ee - E)?.
What is the difference between money, income, and wealth?
What will be an ideal response?
A policy of fiscal austerity could have difficulty lowering the debt-to-GDP ratio because it might:
A. lower both GDP growth and government revenue. B. lower potential output and government spending. C. raise potential output and government spending. D. raise both GDP and government revenue.
Using fiscal policy to stabilize the economy is difficult because:
A. potential income is known. B. the size of the government debt doesn't matter. C. the effects of policy changes are known with certainty. D. there are time lags involved in the use of fiscal policy.