Suppose there are two economies that are identical in every way with the following exception. Economy A has an unemployment compensation system while economy B does NOT have an unemployment compensation system
Now suppose both economies experience the same drop in planned investment. Which of the following is correct? A) Real GDP will fall more in economy A than in economy B.
B) Real GDP will fall more in economy B than in economy A.
C) Real GDP will fall the same in both economies.
D) The effect on the relative size of the reduction in real GDP in the two economies is ambiguous.
B
You might also like to view...
In the above figure, if the wage rate fell below Wb, in the short run the firm would
A) hire more workers. B) fire several workers. C) reduce its level of output. D) keep all its input levels the same as they were before.
Which one of the following could cause a recessionary gap?
A. Interest rates are too low. B. Consumers spend more than they earn. C. Price levels are too high. D. Businesses spend more than they save.