In the basic Keynesian model, a tax increase:
A. reduces short-run equilibrium output.
B. increases potential output.
C. reduces potential output.
D. increases short-run equilibrium output.
Answer: A
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Pigouvian taxation:
A. involves the use of taxes or fees to remedy negative externalities. B. involves the use of subsidies to remedy negative externalities. C. is a legal principle requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses. D. requires that victims of an externality pay a tax to the producers of the externality.
Refer to Table 15-1. When producing the profit-maximizing output, what is the amount of the firm's profit?
A) $335 B) $350 C) $880 D) $910
If the value of exports equals $6.5 billion and the value of imports equals $8.0 billion in a year, then:
a. together imports and exports add $1.5 billion to the gross domestic product (GDP). b. together exports and imports add $6.5 billion to the gross domestic product (GDP). c. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion. d. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion. e. together exports and imports add nothing to the gross domestic product (GDP).
One benefit of automatic stabilizers is that they
a. decrease consumption during a recession below what it would otherwise be b. make GDP more volatile c. cause the cyclical deficit to fall during a recession d. increase consumption during a recession above what it would otherwise be e. increase consumption during an expansion above what it would otherwise be