In 2008, consumers were mailed a stimulus check in response to the recession. The result showed that Ricardian equivalence:
A. failed to hold, as most people spent a substantial share of the money.
B. failed to hold, as most people saved the money.
C. held, as most people saved the money.
D. held, as most people spent a substantial share of the money.
Answer: A
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In the circular flow model of an economy, households
A) receive income from buyers of goods and services. B) receive income from the sale of factors in the goods markets. C) pay firms for the use of their factors. D) receive income from producers for the use of factors in the factor markets.
All else equal, in an economy with an upward-sloping production function, as an economy accumulates more capital goods,
A) the labor supply must increase. B) real GDP increases. C) the labor supply must decrease. D) the marginal product of capital will increase.
When the federal government incurs a budget deficit, it will
A) mint more coins and spend them. B) create money out of thin air. C) impose a special tax on all income earners. D) borrow money from the Federal Reserve System by issuing securities. E) borrow money from the public by issuing government securities.
One reason the Medicare system costs so much is
A. the supply of medical services does not respond to price changes. B. the amount of medical services is determined by the equilibrium of supply and demand. C. supply and demand analysis does not apply. D. beneficiaries are entitled to receive services for which the per-unit cost exceeds their own personal out-of-pocket payment.