The spending multiplier indicates that:
a. changes in investment, government, or consumption spending trigger much larger changes in real GDP.
b. an autonomous increase in saving will cause output to rise by a multiple of the additional saving.
c. a market economy will be more stable than classical economists thought.
d. the marginal propensity to consume is greater than one.
a
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Answer the following statement(s) true (T) or false (F)
1.Economists who believe that, in the short run, discretionary monetary and fiscal policy can stimulate a recessionary economy with aggregate demand management are known as activists. 2.Expansionary fiscal policy is usually effective at correcting for negative supply shocks. 3.Between 1999 and 2004, inflation was low but housing prices were increasing very rapidly. 4.The use of payment contracts that automatically adjust for changes in inflation is known as indexing. 5.Indexing is an effective method for preventing rises in the inflation rate.
If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is:
A. 20 percent B. 25 percent C. 30 percent D. 40 percent
For a competitive firm, the marginal revenue product is:
A. always positive and nears zero as quantity increases. B. always negative and nears zero as quantity increases. C. decreasing eventually as quantity increases. D. zero when profits are maximized.
Which of the following is NOT included in the money supply when the transactions approach is used?
A. money market deposit accounts B. currency C. traveler's checks D. transaction deposits