Which of the following best describes the idea of a political business cycle?
A. Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.
B. Fiscal policy will result in alternating budget deficits and surpluses.
C. Despite good intentions, various timing lags will cause fiscal policy to reinforce the business cycle.
D. Politicians are more willing to cut taxes and increase government spending than they are to do the reverse.
Answer: A
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Assuming the existence of economies of scale, if a firm finds that it can reduce its unit cost by decreasing its scale of production, it means that
A) it has too much production capacity relative to its demand. B) it should try to produce less. C) the law of diminishing returns has not taken effect. D) it has too much fixed overhead relative to its variable cost.
The income and expenditure approaches to calculating GDP will produce the same result because for every dollars worth of output that is produced a dollars worth of income will be generated as income for the owners of the factors of production used to produce the output
a. True b. False
If MPC = 0.80, how much should government spending change to increase real GDP by $500?
A. ?100. B. +80. C. ?80. D. +100.
In product markets:
A. businesses sell resources to households. B. households sell products to business firms. C. businesses sell goods and services to households. D. households sell resources to business firms.