Classical economists think that lump-sum tax changes
A) should be used to smooth business cycles.
B) have a powerful effect on the economy.
C) affect aggregate demand after a lag.
D) have no effect because of Ricardian equivalence.
D
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Say's law states that
A) supply creates its own demand. B) supply and demand are never equal. C) demand may be greater than supply. D) supply will usually be greater than demand.
Refer to the table, in which investment is in billions. Suppose the Fed reduces the interest rate from 6 to 5 percent at a time when the investment demand declines from that shown by columns (1) and (2) to that shown by columns (1) and (3). As a result of these two occurrences, investment will:
A. increase by $10 billion.
B. decrease by $10 billion.
C. increase by $20 billion.
D. decrease by $20 billion.