Imagine that the U.S. economy is in equilibrium at full employment without inflation where national income is at $6,700 billion. The MPC = 0.8 . If massive flooding along the Mississippi River leads Congress to approve a spending package of $10 billion to aid flood victims, the government must also take which of the following actions to keep the economy in equilibrium at full employment without
inflation?
a. increase taxes by $10 billion
b. decrease taxes by $10 billion
c. increase taxes by more than $10 billion
d. decrease taxes by more than $10 billion
e. increase taxes by less than $10 billion
C
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In Vickery auctions, the item is awarded to the highest bidder at a price set by
a. Highest bid b. Second highest bid c. Third highest bid d. Cost
Which of the following is not correct?
a. Frictional unemployment results from the process of matching workers and jobs. b. Structural unemployment results when the number of jobs is insufficient for the number of workers. c. Minimum wages are the predominant reason for unemployment in the U.S. economy. d. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, it raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.