The proper short-run goal of macroeconomic policymakers is to
A) amplify the business cycle.
B) dampen the business cycle.
C) promote high economic growth.
D) maintain low economic growth.
B
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When there are few unemployed resources, additional spending will tend to
a. flow directly to the unemployed resources, so that the multiplier can be maintained at 1/1-mpc. b. increase the marginal propensity to consume, and thereby increase the size of the multiplier. c. increase the demand for resources and drive prices downward, increasing the size of the multiplier. d. bid resources away from other activities and drive prices upward, reducing the size of the multiplier.
Empirically, there is a close positive relationship between domestic savings and investment. This is consistent with what we should expect to observe in
a. a closed economy. b. the Mundell-Flemming model with perfect capital mobility. c. the Mundell-Flemming model with perfect capital mobility and flexible exchange rates. d. the Mundell-Flemming model with perfect capital mobility and fixed exchange rates. e. none of the above.