Mainstream economists believe that Keynesian economists overstate the effect of the multiplier effect. Which of the following statements would mainstream economists NOT consider to be accurate?
A) A fiscals stimulus does not provide a 'free lunch' but does 'crowd out' private consumption expenditure and investment.
B) A fiscal stimulus is a vital tool to fight recession and depression due to the multiplier effect.
C) Effects of a fiscal stimulus are small and short lived.
D) A fiscal stimulus results in bigger government, lower potential GDP, and slower real GDP growth.
E) Effects of a fiscal stimulus are incapable of working fast enough to make a difference.
B
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Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer
Answer the next question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government SpendingTax RevenuesGDPYear 1$450$425$2,000Year 25004503,000Year 36005004,000Year 46406205,000Year 56805804,800Year 66006205,000If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is
A. 3.9%. B. 2.5%. C. 1.39%. D. 7.5%.