Government spending affects aggregate demand directly, and tax changes affect aggregate demand indirectly. Therefore, changes in
a. taxes are ineffective in changing aggregate demand.
b. government spending affect aggregate demand more quickly than changes in taxes.
c. taxes are virtually useless as a stabilization tool.
d. government spending should be used with great caution.
b
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The U.S. economy has seen a faster increase in productivity since the mid-1990s as compared to the economies of many Western European countries. Which of the following explains this?
A) The United States has a higher rate of job mobility than do many Western European countries. B) U.S. unions impose stricter work rules as compared to unions in Western European countries. C) U.S. government regulations impose stricter work rules as compared to government regulations in Western Europe. D) U.S. workers can obtain unemployment insurance for a longer period of time as compared to workers in most Western European countries.
Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if
A) the per-worker production function shifts downward. B) there is technological change. C) there are decreases in human capital. D) there continue to be decreases in capital per hour worked.
Policymakers may be uncertain about the state of the economy because
A) initial releases of data may be less accurate than later data releases. B) they don't know the predominant source of shocks to the economy. C) they don't know how shocks affect people's expectations. D) they are not aware of modern macroeconomic modeling techniques.
An increase in a country's saving rate will tend to cause which of the following in the long run?
A) a reduction in per capita real GDP B) an increase in economic growth C) an increase in the unemployment rate D) an increase in the rate of inflation