If the value of the multiplier is smaller, the economy
a. becomes less stable because automatic stabilizers have a larger impact.
b. becomes more stable because automatic stabilizers have a larger impact.
c. becomes more volatile because automatic stabilizers have a lesser impact.
d. is subject to larger fluctuations because automatic stabilizers have no impact.
b
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If a firm has monopoly power in the market for its output, the marginal revenue product of labor
a. is no different than for a competitive firm. b. is less for each unit of labor than for a competitive firm. c. continuously slopes upward instead of turning downward. d. is greater for each unit of labor than for a competitive firm.
If AS increases at a faster rate than AD, the result will be
A. demand-side inflation. B. supply-side inflation. C. falling prices. D. stable prices.
The recovery phase of the business cycle ends when
A. we reattain the level of the previous peak. B. we reattain the level of the previous trough. C. we go into the next recession. D. we are back at full employment.
Describe the effects of contractionary monetary policy by the domestic central bank on output, the real interest rate, and net exports in both the domestic and foreign country, using a Keynesian model in the short run. What happens in the long run? Show a diagram to illustrate the short- and long-run effects in both countries.
What will be an ideal response?