Answer the following questions true (T) or false (F)
1. Suppose real GDP is $13 trillion and potential real GDP is $13.5 trillion. If Congress and the president increase government purchases by $500 billion, then the economy will be brought to equilibrium at potential real GDP.
2. In the case of an upward-sloping aggregate supply curve, the change in real GDP brought about by a change in government spending will be less than that predicted by the simple government purchases multiplier.
3. Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.
1. FALSE
2. TRUE
3. FALSE
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If a union is able to decrease the supply of workers in a competitive labor market but the union cannot affect the demand for its members' labor, then
A) wages and the quantity of labor hired will both increase. B) wages will increase but the quantity of labor hired will decrease. C) wages will decrease but the quantity of labor hired will increase. D) wages and the quantity of labor hired will both decrease.
A player's best response is
A) the strategy that maximizes his payoff given what he thinks the other player will do. B) a dominant strategy. C) impossible to find when there isn't a Nash equilibrium. D) a way to avoid the prisoners' dilemma.