You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $300 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?
A. Reduce government spending by $300 billion and increase taxes by $300 billion.
B. Increase government spending by $300 billion and reduce taxes by $300 billion.
C. Decrease both government spending and taxes by $300 billion.
D. Increase both government spending and taxes by $300 billion.
Answer: D
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What will be an ideal response?
In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________
minimum average total cost. A) equal to; higher than; lower than B) equal to; lower than; higher than C) higher than; equal to; lower than D) lower than; equal to; higher than
Diversification involves:
A. investing all your money in one company. B. buying only one kind of stock. C. buying only low-risk bonds. D. None of these statements is true.
The expectation of a lower inflation rate will cause: a. the short-run Phillips curve to become vertical
b. the short-run Phillips curve to shift leftward. c. a movement down along a short-run Phillips curve. d. the short-run Phillips curve to shift rightward.