If the economy in the graph shown were at point B, and the government wished to bring the economy back to its long-run equilibrium, it might:
A. increase income tax.
B. decrease tax credits.
C. increase government spending.
D. All of these would move the economy to its potential GDP from point B.
Answer: C
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Game theory assumes that to compute the likely outcome of games, one needs to assume that players act
a. Rationally b. Optimally c. In their own self-interest d. All the above
In long-run equilibrium in perfect competition, the entry and exit of firms will drive economic profits to zero
a. True b. False Indicate whether the statement is true or false
Why do people hold money? Explain the reasons.
What will be an ideal response?
The direct impact of contractionary monetary policy is to:
A. lower U.S. income, reduce U.S. imports, and lower the value of the dollar. B. raise U.S. income, increase U.S. imports, and raise the value of the dollar. C. raise U.S. income, increase U.S. imports, and lower the value of the dollar. D. lower U.S. income, reduce U.S. imports, and raise the value of the dollar.