When a government has decided on a permanent spending increase, a valid reason to increase borrowing rather than taxes might be to ________
A) to avoid an unnecessary stimulus to aggregate demand
B) to shift the burden from domestic taxpayers to foreign bond holders
C) to avoid distortions that might reduce long-run aggregate supply
D) to avoid an increase in income inequality
C
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Nicole is indifferent between option A, which gives her $20,000 for sure, and option B, which gives her $10,000 with probability 0.5 or $32,000 with probability 0.5. Nicole's cost of risk for option B is
A) zero. B) $1,000. C) $2,000. D) $20,000.
Personal income taxes are reduced as part of an expansionary fiscal policy. What is the impact on aggregate expenditures and income?
A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases.
An upward-sloping line or curve is used to illustrate:
A. a direct relationship. B. an inverse relationship. C. two unrelated variables. D. the ceteris paribus assumption.
Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of unemployed workers will ______ and the number of employed workers will _______.
1) increase; increase 2) decrease; increase 3) increase; decrease 4) increase; not change