Explain the Ricardian equivalence theorem.
What will be an ideal response?
The Ricardian equivalence theorem is the proposition that an increase in the government budget deficit has no effect on aggregate demand. When government spending increases without taxes, people expect future taxes to increase and so increase their saving to be ready to pay the higher future taxes. The reduction in consumption spending offsets the higher government spending, so that aggregate demand does not change.
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According to the above table, if per capita real GDP is currently $1000, then at a constant annual rate of growth of 8 percent, per capita real GDP ten years from now will be equal to
A) $2140. B) $2160. C) $2000. D) $2590.
Refer to the table above. If the market price of wine is $4/bottle, and the market demand for wine is 65 bottles, Sandra's demand for wine is:
A) 18 bottles. B) 40 bottles. C) 47 bottles. D) 111 bottles.
What does a labor supply curve represent? What does it look like?
What will be an ideal response?
In the short-run macro model, equilibrium occurs when
a. all of the following conditions are satisfied b. the unintended change in inventories is zero c. total sales equals output d. the aggregate expenditure line intersects the 45-degree line e. GDP equals aggregate expenditure