If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then
What will be an ideal response?
the economy is in recession
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The smaller the MPC the ________ the expenditure multiplier and the ________ the effect of a change in expenditure on equilibrium output.
A. larger; smaller B. larger; larger C. smaller; smaller D. smaller; larger
Assume that the labor market for auto mechanics is initially in equilibrium. Which of the following would lead to an increase in both the wage rate and employment for auto mechanics?
a. a decrease in the price of a substitutable input b. a decrease in the price of a complementary input c. an increase in training costs for auto mechanics d. a decrease in wages in an alternate labor market e. a decrease in demand for the output of firms employing auto mechanics
A government spending and taxation policy to create full employment without inflation is known as
a. closing an inflationary gap b. fiscal policy c. closing a recessionary gap d. a balanced budget e. a balanced budget multiplier
Recall the Application about the use of fertilizer and its impact on crop yields to answer the following question(s). The table is taken from this Application.
Bags of Fertilizer Bushels of Corn0851120213531444147Refer to the table above. After applying the second bag of fertilizer, the farmer experienced:
A. increasing returns. B. diminishing returns. C. constant returns. D. negative returns.