Suppose the price level is fixed, the MPC is .8, and the GDP gap is a negative $200 billion. To achieve full-employment output (exactly), government should:
A. increase government expenditures by $200 billion.
B. reduce taxes by $200 billion.
C. increase government expenditures by $40 billion.
D. reduce taxes by $160 billion.
C. increase government expenditures by $40 billion.
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Pirates have been intensely attacking ships off the shore of Somalia this year. Boat owners have reportedly coughed up more than $30 million in ransom and insurance premiums have shot up. Why would insurance premiums increase dramatically?
I. Because the probability of pirate attack has increased II. Because consumers' willingness to pay for insurance has increased because of these attacks III. Because insurance claims have increased A) I only B) I and III only C) III only D) I, II, and III
The American Recovery and Reinvestment Act passed in February 2009 was the largest measure of discretionary fiscal policy in US history
a. True b. False Indicate whether the statement is true or false