If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is
a. 1/2.
b. 1.
c. 2.
d. 4.
b
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Compared to a country with an MPC of 0.9, a country with an MPC of 0.5 would have to change government expenditures by ________ as much to have the same impact on real GDP.
A. twice B. three times C. four times D. five times
Suppose that real GDP is initially $14 trillion and the government attempts to increase real GDP to $15 trillion. The marginal propensity to consume is 0.8, and every $1.00 increase in real government spending crowds out $0
50 in real planned investment expenditures. Which increase in government spending below could yield the desired level of real GDP? A) $200 billion B) $125 billion C) $100 billion D) $400 billion
When the tax rates imposed on the rich are high, a reduction in these rates
a. will always lead to a reduction in the tax revenue collected from the rich. b. will not affect the tax revenue collected from the rich. c. will increase the reported incomes of the rich and it may also lead to an increase in tax revenue collected from them. d. will decrease the reported incomes of the rich, and thereby reduce the tax revenue collected from them.
A key assumption about the way firms behave is that they
A. maximize revenue. B. minimize costs. C. maximize profit. D. maximize market share.