Many government programs, such as unemployment compensation, operate on a deficit during recessions and a surplus during periods of economic expansion. The programs are referred to as
A) discretionary fiscal policy.
B) automatic stabilizers.
C) Ricardian equivalence.
D) Recognition time lag.
Answer: B) automatic stabilizers.
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Lou and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The table below shows the number of rooms they can each clean and the number of meals they can each cook in an hour. Rooms CleanedPer Hour Meals CookedPer HourLou54Alex33For Alex, the opportunity cost of cleaning one room is making ________ meal(s); for Lou the opportunity cost of cleaning one room is making ________ meal(s).
A. 4; 4 B. 3; 5 C. 1; 4/5 D. 1; 5/4
According to the equation of exchange, the
A) quantity of money divided by the inflation rate equals real GDP. B) quantity of money minus the velocity of circulation equals real GDP minus the price level. C) quantity of money multiplied by the velocity of circulation equals nominal GDP. D) velocity of circulation is always smaller than the inflation rate. E) quantity of money multiplied by the inflation rate equals nominal GDP.
Suppose the market-clearing price of wheat is $2.50 per bushel. At a price above $2.50,
A) supply would equal demand. B) quantity supplied would equal quantity demanded. C) quantity supplied would exceed quantity demanded. D) quantity supplied would be less than quantity demanded.
The new classical model implies that substitution of debt for tax financing
a. increases aggregate demand and exerts an expansionary effect on real output. b. is highly effective against inflation. c. reduces savings because it increases both the current and future tax liability of households. d. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates.