The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:
A. fails to hold, and people increase their spending.
B. holds, and people save more.
C. holds, and people increase their spending.
D. fails to hold, and people save more.
Answer: A
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In the country of Kwaki, people produce canoes, fish for salmon, and grow corn. In one year they produced 5000 canoes using labor and natural materials only, but sold only 4000, as the economy entered a recession
The cost of producing each canoe was $1000, but the ones that sold were priced at $1250. They fished $30 million worth of salmon. They used $3 million of the salmon as fertilizer for corn. They grew and ate $55 million of corn. What was Kwaki's GDP for the year?
To avoid employees "gaming" the system
a. Try to anticipate the more obvious games b. Adjust the compensation scheme to avoid the most obvious games c. Monitor outcomes to ensure that you are getting the behavior you desire d. All of the above
Suppose the federal government is considering alternatives to increase the level of real GDP in order to reduce unemployment. It can only do one of the following. Which will have the smallest impact on the federal budget?
a. decreasing transfer payments b. increasing government spending c. increasing transfer payments d. decreasing government spending
Who does the government borrow from?
What will be an ideal response?