In an economy where aggregate spending is given by Y = 5,500 + 0.6Y - 20,000r, the interest rate is currently 5 percent (0.05). If potential output equals 11,750, the central bank must ________ the interest rate to close the ________ gap.
A. raise; recessionary
B. reduce; recessionary
C. raise; expansionary
D. reduce; expansionary
Answer: B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The idea that firms retain some workers in a recession, whom they would otherwise lay off, to avoid the costs of hiring and training, is called
A) the gift exchange motive. B) worker pooling. C) labor hoarding. D) union busting.
Working conditions, prestige, variety, location, employee freedom, and employee responsibilities are all examples of
a. pecuniary job characteristics. b. the tools of employment discrimination. c. sociological factors affecting employment. d. non-pecuniary job characteristics.
If demand for farm crops is inelastic, a good harvest will cause farm revenues to:
A. decrease because of a percentage fall in price greater than the percentage increase in quantity sold. B. increase because of a downward movement along the supply curve, encouraging an increase in demand. C. increase because of the increase in the quantity that farmers can sell. D. remain unchanged because the increase in quantity that can be sold will be matched by an equal decrease in price.