Assume that an economy's income multiplier is 4 . If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full employment equilibrium without inflation of $1,500 billion?
a. $500 billion spending cut
b. $500 billion spending increase
c. $125 billion spending cut
d. $125 billion spending increase
e. $2,000 billion spending cut
C
You might also like to view...
Answer the following statement(s) true (T) or false (F)
1. A negligence standard, with the allowance of contributory negligence, always leads to a socially optimal outcome. 2. Strict liability is the liability that exists when it can be proven beyond a reasonable doubt that the defendant was negligent. 3. Negligence is irrelevant when a strict liability standard is applied. 4. The principle of general average gives a ship's captain an incentive to consider the value of cargo when jettisoning it to prevent a disaster. 5. The doctrine of Respondent Superior contends that an employer is sheltered from torts committed against his employees.
If the per-worker production function shifts up
A) it now takes more capital per hour worked to get the same amount of real GDP per hour worked. B) the per-worker production function becomes flatter. C) an economy can increase its real GDP per hour worked without changing the level of capital per hour worked. D) negative technological change has occurred in the economy.
If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?
a. The firm should use relatively more capital b. The firm should use relatively more labor c. The firm should not make any changes – they are currently efficient d. Using the Equimarginal Criterion, we can't determine the firm's efficiency level e. Both c and d
It is true of externalities that they
a. arise when all costs, social and private, are included in production cost. b. are always beneficial. c. are always detrimental. d. None of the above are correct.