Which set of fiscal policies would tend to offset each other?
A. A decrease in government spending and no change in taxes
B. An increase in government spending and a decrease in taxes
C. A decrease in government spending and taxes
D. A decrease in government spending and an increase in taxes
Answer: C
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The labor force participation rate
A) increases as the real wage increases. B) decreases as the real wage increases. C) has nothing to do with the real wage rate. D) increases as the opportunity cost of working increases. E) is one of the major reasons that firms pay efficiency wages.
The classical economists believed that
a. labor supply is upward sloping because the income effect is greater than the substitution effect. b. labor supply is upward sloping because the substitution effect is greater than the income effect. c. labor supply is downward sloping because the income effect is greater than the substitution effect. d. in equilibrium, the marginal product of labor must exceed the real wage. e. both b and d.
Other things being equal, an increase in trade restrictions on imports will:
A. increase the demand for foreign currency, causing it to appreciate. B. increase the demand for foreign currency, causing it to depreciate. C. reduce the demand for foreign currency, causing it to depreciate. D. reduce the demand for foreign currency, causing it to appreciate.
As the economy declines, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system:
A. offsets the timing problem for fiscal policy. B. provides built-in stability for the economy. C. increases crowding out in the economy. D. decreases real interest rates in the economy.