When the spending of consumers, businesses, government, and foreigners (net exports) is less than the current level of output, Keynesian analysis indicates that
a. the economy's output will fall short of its potential.
b. prices will rise.
c. equilibrium real GDP will increase.
d. inventories will decline.
A
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Temporary tax cuts would cause
A) the AA-curve to shift left. B) the AA-curve to shift right. C) the DD-curve to shift left. D) the DD-curve to shift right. E) a shift in the AA-curve, although the direction is ambiguous.
The Laffer curve specifies
a. a negative relationship between marginal tax rates and tax revenue. b. a positive relationship between marginal tax rates and tax revenue. c. no relationship between marginal tax rates and tax revenue. d. none of the above.
The incentives to work that result from the existence of private property accrue to
A. neither the weak nor the strong. B. both the weak and the strong. C. only the strong. D. only the weak.
Consider an economy in long-run equilibrium with an inflation rate (?) of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point increase in the unemployment rate reduces real output by 2% of full-employment output. The expectations-augmented Phillips curve is given by ? = ?e - 2.5 (u - 0.05).Consider a two-year disinflation. In the first year, ? = 0.06 and ?e = 0.08. In the second year, ? = 0.04 and ?e = 0.05.(a)In the first year, what is the value of the unemployment rate?(b)In the first year, by what percentage does output fall short of full-employment output?(c)In the second year, what is the value of the unemployment rate?(d)In the second year, by what percentage does output fall short of full-employment
output?(e)What is the sacrifice ratio for this disinflation? What will be an ideal response?