The Prime Minister of Richlandia hires you as an economic consultant. He is concerned that the output level in Richlandia is too low and that this will cause unemployment to rise. He feels that it is necessary to increase output by $20 billion. He tells you that the MPC in Richlandia is 0.75. Which of the following would be the best advice to give to the Richlandian Prime Minister?
A. Increase government purchases in Richlandia by $5 billion.
B. Reduce taxes in Richlandia by $4 billion.
C. Increase government purchases in Richlandia by $15 billion.
D. Reduce taxes in Richlandia by $10 billion.
Answer: A
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A) real bills doctrine. B) liberal liquidity doctrine. C) free reserves doctrine. D) quantity theory of money.
Refer to Figure 9.5. If the government establishes a price floor of $2.50, how many pounds of berries will be sold?
A) 200 B) 300 C) 400 D) 600 E) 800
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a. not be affected in the money creating process. b. not have a way to loan out excess reserves. c. be able to expand the money supply by more than the money multiplier indicates. d. not be able to create new money. e. not be able to find new borrowers.
A transaction with negative externalities will result in _____
a. overproduction b. underproduction c. maximization of net social welfare d. the true cost being borne by the participants in the transaction