If planned aggregate expenditure (PAE ) in an economy equals 3,000 + 0.75Y and potential output (Y*) equals 12,000, then this economy has:
A. no output gap.
B. no autonomous expenditure.
C. an expansionary gap.
D. a recessionary gap.
Answer: A
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Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?
A) (X - M ) + (T - G ) + (S - I ) = 0 B) (X - M ) = (T - G ) + (S - I ) C) (T - G ) + (X - M ) = (S - I ) D) (T - G ) = (X - M ) + (S - I )
The principal-agent problem of ownership vs. control of the corporation tends to get worse when
A) stock in a corporation is held exclusively by a small number of people who control the company's day-to-day operations. B) stock in the company is tightly held, but there are some "outsider" stockholders. C) stock in the company is very diffusely held, with no individual or group having control over a large block of stock. D) managers have profit-sharing schemes as part of their incentive package. E) managers focus on maximizing the firm's profits, rather than the firm's market share.
Households and firms pay taxes to the government to:
a. increase their consumption spending. b. finance the country's import bill. c. increase their savings. d. improve their standard of living. e. finance government expenditures.
The main goal of the Fed is to control ______ and the money supply through its monetary policy instruments.
a. short-run real interest rates b. short-run nominal interest rates c. long-run real interest rates d. long-run nominal interest rates