Suppose there are two policy options facing a vote in the Senate. In the first, government spending will increase $50 billion, while the second option is to cut taxes by $50 billion. A Keynesian economist would argue for
A) the spending option because it has a bigger impact on total spending. The spending directly raises total spending plus it works through the multiplier, while the tax cut only works through the multiplier.
B) the tax option because it is easier to pass. The effects on total spending would be identical.
C) the spending option because it won't affect the deficit the way the tax cut would.
D) the tax option because it also affects the incentives workers face. Long-run aggregate supply will increase with the tax cut, but not with the spending increase.
A
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The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to
A) 1.67 baseball hats. B) 6.00 baseball hats. C) 12.78 baseball hats. D) 18.00 baseball hats.
Refer to Figure 14-4. What is the equilibrium outcome in this game and is this a subgame-perfect equilibrium?
A) Either offer of $30 or $40 per copy of the software package is accepted and these two equilibria are subgame-perfect equilibria. B) In the equilibrium, neither offer is accepted as Rainbow Writer holds out for a better deal. The two rejection outcomes are subgame-perfect equilibria. C) Either offer of $30 or $40 per copy of the software package is accepted but these are not are subgame-perfect equilibria. D) In the equilibrium, Odeon offers $40 per copy of the software package and is accepted but this is not a subgame-perfect equilibrium.
If aggregate expenditure is less than GDP, then inventories rise and GDP falls
Indicate whether the statement is true or false
If UIP holds, the foreign interest rate is 10%, and the home currency is expected to depreciate by 4%, then the home interest rate is:
a. 4% b. 6% c. 10% d. 14%