To compensate for the possibility of indirect crowding? out, a government engaging in expansionary policy aimed at eliminating a recessionary gap could
A) reduce taxes rather than increase government spending.
B) increase spending less than the simplest Keynesian model would predict.
C) both reduce taxes and reduce spending to be able to achieve full employment.
D) increase spending more than the simplest Keynesian model would predict.
Answer: D) increase spending more than the simplest Keynesian model would predict.
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For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?
a. both country A and country B b. neither country A nor country B c. country A but not country B d. country B but not country A
Which person has the highest opportunity cost of obtaining a college degree (assuming that attending college requires giving up his or her current position)?
A. Bill, who is unemployed. B. Jane, who is an unwed mother and earns $15,000 a year. C. Larry, who is a technician in the navy earning $18,000 a year with free food and housing. D. Mary, who has a job earning $60,000 a year as a computer programmer. E. Unable to determine from the data given.