In the Keynesian model, suppose the Fed sets a target for the real interest rate. If the IS curve shifts to the left, and the Fed wants to keep output unchanged,
A. taxes will decrease.
B. the real interest rate will decrease.
C. taxes will increase.
D. the money supply will decline.
Answer: B
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In the long run, the unemployment rate is independent of inflation, and the Phillips curve is vertical at the natural rate of unemployment.
Answer the following statement true (T) or false (F)
One person out of every 1000 is an economist and 90% of them are math oriented. If only 5% of the population is math oriented and you pick a person at random who happens to be math oriented, it is
A. likely that the person chosen is not an economist rather than an economist. B. likely that the person chosen is an economist rather than an non-economist. C. almost impossible the person will be an economist. D. almost certain the person will be an economist.
The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:
A. fails to hold, and people increase their spending. B. holds, and people save more. C. holds, and people increase their spending. D. fails to hold, and people save more.
The following is budget information for a hypothetical economy. All data are in billions of dollars.YearGovernment SpendingTax RevenuesGDP1$800$825$4,00028508504,20039008754,35049509004,50051,0009254,600Refer to the above data. The budget deficit was $75 billion in:
A. year 5. B. year 2. C. year 3. D. year 4.