In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPC is 0.6, then it would increase government purchases by
A. $31.25 billion.
B. $10 billion.
C. $20 billion.
D. $40.50 billion.
Answer: C
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A valid and useful theory of gold prices:
A. very likely includes as many details as possible about gold prices. B. helps to explain and predict the movements of gold prices over time. C. all of the above D. very likely relies on complex assumptions.
Assume that movement from point A to point B represents a 25 percent change in the price level. What would be the corresponding short-run change in the price of inputs?
a. 100 percent
b. 50 percent
c. 25 percent
d. no change
An increase in the personal income tax rate on interest income will
A. increase desired saving because the expected real after-tax interest rate falls. B. decrease desired saving because the expected real after-tax interest rate falls. C. increase desired saving because the expected real after-tax interest rate rises. D. decrease desired saving because the expected real after-tax interest rate rises.