Under the George W. Bush Administration, federal income taxes were cut twice and defense spending boosted substantially. Taken together, these actions are likely to have
A. decreased aggregate demand.
B. decreased aggregate supply.
C. increased aggregate demand.
D. increased aggregate supply.
Answer: C
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An advantage of automatic stabilizers is that
A. they are built into the economy by legislation and therefore are already in place when economic conditions change. B. they give the government an opportunity to spend extra tax money collected. C. they intensify changes in the business cycle. D. they produce balanced budgets.
If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A. higher level of output at lower prices. B. lower level of output and prices. C. higher level of output and prices. D. lower level of output at higher prices.
Which of the following is not a determinant of a good's price elasticity of demand?
A) the slope of the demand curve B) whether the good is a luxury or a necessity C) the share of the good in the consumer's total budget D) the passage of time
Suppose the firms in a monopolistically competitive market are earning positive economic profits. What will happen to move the market to its long-run equilibrium?
A) The firms' demand curves will become less elastic. B) The demand curves faced by firms in the market will shift to the right. C) More close substitutes will appear in the market. D) Some firms will exit the market if they can't cover all of their fixed and variable costs.