If planned aggregate expenditure (PAE) in an economy equals 1,000 + 0.9Y and potential output (Y*) equals 9,000, then this economy has:
A. no autonomous expenditure.
B. an expansionary gap.
C. no output gap.
D. a recessionary gap.
Answer: B
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In a market for apples, a consumer purchases 30 pounds when the price of apples is $1 per pound and the consumer's income is $5,000 per month
When the price of apples increases to $2 per pound, without any change in the consumer's income, he decides to purchase only 15 pounds of apples. Suppose, after a given period of time, the consumer's income falls to $3,000 per month. His consumption of apples also decreases to 10 pounds. Using a graph, illustrate the difference between change in quantity demanded and the change in demand for apples.
Using the DD-AA framework, which one of the following statements is the MOST accurate?
A) Only monetary policy can bring the economy to full employment. B) Only fiscal policy can bring the economy to full employment. C) Only both monetary and fiscal policies can bring the economy to full employment. D) Both policies are capable of bringing the economy to full employment and low inflation. E) Monetary policy by itself or fiscal policy by itself can bring the economy to full employment.
Suppose that U.S. firms outsource plane manufacturing jobs to China, it is expected that
A) the wage rate for workers manufacturing planes will decrease in the U.S. but increase in China. B) the wage rate for workers manufacturing planes will increase in the U.S. but decrease in China. C) the wage rate for workers manufacturing planes will increase in both the U.S. and China. D) the wage rate for workers manufacturing planes will decrease in both the U.S. and China.
During the 2009-2010 stimulus debate, Republicans argued that increases in government spending would be more effective than decreases in taxes
a. True b. False Indicate whether the statement is true or false