Assume that taxes depend on income. The MPC is 0.8 and t is 0.25. The government spending multiplier is
A. 1.67.
B. 2.5.
C. 5.
D. 10.
Answer: B
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Upon getting a big promotion, Sally decides to buy a house in the neighborhood she grew up in as a child. In fact, the house she buys used to belong to a neighbor of hers, and so she's certain it's in good shape and well worth the $200,000 she pays for it. The only thing Sally needs to do is replace all the gutters for $1,000, which she happily does. How will GDP be affected by Sally's recent purchases?
A. Consumption will increase by $210,000. B. GDP will increase by $1000. C. Consumption will increase by $1,000, and investment will increase by $200,000. D. Investment will increase by $201,000.
The participation rate in the U.S. has increased steadily over time. First, explain what the participation rate represents. Second, explain why the participation rate has increased
What will be an ideal response?
Economic freedom:
a. is the right to own property. b. means not having to pay taxes. c. is absent in rich countries. d. affects only poor people. e. is the ability to engage in voluntary trade.
When the U.S. real interest rate rises, foreigners will want to purchase
a. more U.S. assets so U.S. net capital outflow rises. b. more U.S. assets so U.S. net capital outflow falls. c. less U.S. assets so U.S. net capital outflow rises. d. less U.S. assets so U.S. net capital outflow falls.