Which of the following is a government response to asymmetric information?

Higher relative wages for labor tends to

A) increase the supply of labor. B) decrease the demand for labor. C) encourage firms to find substitutes, such as automation. D) accomplish all of the above.

Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016. It also raises taxes by $1 billion to keep the deficit from growing. If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?

A) GDP increases by $900,000. B) GDP increases by $10 billion. C) GDP increases by $1 billion. D) GDP does not change.