A fiscal policy action to close a recessionary gap is to:
A. decrease the marginal propensity to consume.
B. increase transfer payments.
C. decrease government purchases.
D. increase taxes.
Answer: B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
If the firm hires 5 workers, the average cost equals
a. $10 b. $1000 c. $80 d. Need more information
In the national income accounting system, saving refers to the accumulation of newly produced physical entities, such as factories, machinery, houses, and goods inventories
a. True b. False Indicate whether the statement is true or false
The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate
a. True b. False Indicate whether the statement is true or false