According to supply-side economics, a cut in taxes will affect total tax revenue, because ________. A) the level of productivity should fall precipitously with a tax cut B) a tax cut will be followed by an even larger decrease in government spending C) of the resulting increase in saving D) of the positive impact on […]
In real business cycle models, business cycles are caused by ______, while in new Keynesian model, business cycles are caused by ________. a. aggregate demand; aggregate demand b. aggregate demand; aggregate supply. c. aggregate supply; aggregate demand. d. fiscal policy; monetary policy ANSWER C
With respect to efficiency wage models, the efficiency of workers depends a. positively on the money wage they are paid. b. positively on the real wage they are paid. c. inversely on the age of the workers. d. positively on the unemployment rate. ANSWER B
Unlike a money supply target, an inflation rate target a. will always stabilize income better. b. will stabilize income better if velocity is unstable. c. still allows the Fed unlimited discretion. d. eliminates the need for a central bank. ANSWER B
The opportunity cost of the U.S. producing tea or coffee is measured by the value of the foregone production alternative—manufacturing or staples. Indicate whether the statement is true or false ANSWER TRUE
Supply-side economics focuses on ________. A) the positive effect of tax cuts on aggregate supply B) the impact of an increase in the rate of inflation on aggregate supply C) the impact of changes in aggregate supply on market demand D) the trade-off between aggregate demand and aggregate supply ANSWER A
With respect to Figure 7-2, an increase in government spending a. shifts the IS curve to the left by G(− b/1 − b). b. shifts the IS curve to the right by G(1 − b/1 − b). c. shifts the IS curve to the right by G(1/1 − b). d. does not shift the IS […]
During World War II (1941–45), Engel’s law applied. As income rose, consumption of food dropped relative to all other goods and services purchased. Indicate whether the statement is true or false ANSWER FALSE
In the 1800s, early agricultural activity in the U.S. used the technology of the time which was based on (a) handwork and animal power. (b) waterpower and the steam engine. (c) the internal combustion engine and electric motor. (d) large-scale enterprises using water driven machinery. ANSWER (a)
“Capital dilution” refers to ________. A) the flow of investment in the “bathtub model” B) the depreciation of capital associated with an increase in the percentage of younger workers C) the decline in the marginal product of capital that results from reliance on new, inexperienced workers D) the decrease in capital per worker that is […]
