A perfectly competitive firm will have an economic profit of zero if, at its profit-maximizing output, its marginal revenue equals its

Assume that an economy's income multiplier is 2 and that this economy is in equilibrium at $500 billion. If the government wants to move this economy to full-employment at $600 billion, while maintaining a balanced budget, it must choose which of the following options?

a. increase government spending and taxes by $100 billion b. decrease government spending and taxes by $100 billion c. increase government spending and taxes by $200 billion d. decrease government spending and taxes by $200 billion e. raising the equilibrium level of income while maintaining a balanced budget is impossible

Carefully explain how monetary policy can be used to counter a recession. Explain what the central bank does as well as how its actions affect the economy. Under what circumstances is fiscal policy especially useful?