Which of the following statements is (are) correct? In the insider/outsider model there is a. unemployment due to the real wage being set above the market clearing level. b. cyclical unemployment in response to changes in aggregate demand. c. structural unemployment in response to hysteresis. d. Both a and b e. all of the above […]
The role of the progressive tax system as an autonomous fiscal stabilizer requires that the budget a. should require actual deficits be equal to zero on average. b. should go into a surplus at appropriate points in the business cycle. c. cannot have a structural deficit component. d. Both a and b e. None of […]
For the gold standard to achieve its maximum functioning efficiency, central banks should theoretically play the “rules of the game.” What are these rules? (a) Central bank policy should tie the flow of their gold reserves to their current accounts. (b) Central banks should “lean against the wind” and follow policies that offset gold movements. […]
Those economists who believe that monetary policy is more powerful than fiscal policy argue that the a. LM curve is vertical. b. IS curve is horizontal. c. interest rate elasticity of investment is large. d. interest rate elasticity of investment is small. ANSWER C
If government spending rises but the central bank changes the money supply to prevent income from changing, then a. both consumption and investment will remain unchanged. b. consumption rises and investment falls. c. investment falls but consumption rises. d. both consumption and investment rises. ANSWER C
The “rules of the game,” if followed closely by central banks, would have (a) made trade fluctuations worse than they were. (b) wiped out trade fluctuations. (c) “neutralized” central bank policy. (d) forced the federal government to borrow directly from central banks. ANSWER (b)
If productivity is growing at some sustained rate g, then output and capital per worker ________. A) are growing at the same rate g, in a stable steady state B) are growing faster than g, because improving technology encourages a higher rate of saving and investment C) are growing slower than g, because some of […]
If the tax function is given by T = – 20 + 0.1Y the average tax rate would a. be 0.1. b. fall as income falls. c. vary negatively with income. d. be – 20 + 0.1. e. none of the above ANSWER B
Government austerity measures are more likely to resolve a sovereign debt crisis if ________. A) the real interest rate falls along with inflation B) the fiscal multipliers are especially large C) no aid is available from other countries, so the government is not tempted to abandon the austerity plan D) citizens, also, adopt austerity […]
Where was the largest market for the huge increase in U.S. manufacturing output in 1860–1910 located? (a) In Europe (b) In Asia (c) Within the U.S. (d) In the Third World ANSWER (a)
