The largest component of GDP is
A) gross private domestic investment.
B) personal consumption expenditures.
C) net exports of goods and services.
D) government expenditure on goods and services.
B
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Three candidates for political office disagree over the benefits of enlarging the federal budget deficit
Candidate C says the stimulation package is needed to increase employment and real GDP; Candidate D says it will only cause higher prices; and Candidate F says it will have no effect on either real GDP or the price level. How do the three candidates differ with respect to the condition of the economy and the effects of fiscal policy? A) Candidate C thinks the simple Keynesian model is applicable, while D thinks the expansionary policy will fully crowd out private investment. F believes the economy is experiencing a recessionary ga
The Keynesian cause-and-effect sequence predicts that an increase in the money supply will cause interest rates to:
A. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. B. fall, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP. C. rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP. D. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
The normative economic goals of developing countries:
A. focus primarily on achieving an equitable distribution of income. B. focus primarily on meeting basic needs. C. are the same as those of developed countries. D. focus primarily on achieving economic stability.
Economist A.C. Pigou argued that to deal with a negative externality in production, the government should impose a tax equal to the cost of the externality. What did Pigou believe should be done in the case of a positive externality in consumption? How
would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality? What will be an ideal response?