Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below full-employment real GDP. To achieve full employment, aggregate demand (AD) must be increased $2 trillion. Following discretionary fiscal policy, government spending should be increased:
a. $0.25 trillion.
b. $1 trillion.
c. $0.5 trillion.
d. $2 trillion.
c
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Table 5-1B Number of coconuts 0 1 2 3 4 Robinson’s marginal utility C $2.00 $1.88 $1.60 $1.30 If a graph of Robinson’s marginal utility were constructed from Table 5-1B, it would
A. illustrate the “law” of diminishing marginal utility. B. be a negatively sloped curve. C. illustrate a typical consumer’s satisfaction derived from consumption of consecutive units of a good. D. All of the responses are correct.
Define a Pareto efficient outcome. Does it ensure equity? Explain with an example
What will be an ideal response?
Suppose the President asks you to write him a letter suggesting ways the government might help the economy achieve permanently higher rates of economic growth
Based on your understanding of growth theory and growth accounting, what would you suggest?
For a monopsony, the marginal cost of labor exceeds the wage rate because the firm must increase the wage it pays to all of its workers if it wishes to increase its employment
Indicate whether the statement is true or false