Consumption or household spending of an economy comprises of both consumer spending and business spending
a. True
b. False
Indicate whether the statement is true or false
False
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
In the 1980s the CEO of Coca Cola corporation found out that its core business was making roughly 15% rate of return on investor capital
However, he also discovered that some of the newly acquired subsidiaries were not making anywhere near that amount. He decided to ask each of these companies to come up with a plan to push the rate of return closer to the 15% mark or he warned that these companies might be sold. Why would the CEO sell off companies or operations that are still profitable?
Supply-side economics stress that: a. aggregate demand is the major determinant of real output
b. higher tax rates discourage people from working and investing as much as they would at lower tax rates. c. an increase in government expenditures and tax rates will cause real income to rise. d. expansionary monetary policy will cause real output to expand without accelerating inflation.
Keynes believed the economy was:
A. always moving toward potential income. B. always moving away from potential income. C. always at potential income. D. fluctuating around potential income.