Blueland is passing through a recession. How can the government of Blueland use fiscal policy to improve the economic condition of the country?
What will be an ideal response?
The government can use fiscal policy to shift the labor demand curve to the right during a recession. Increasing spending increases the demand for the products that firms produce, shifting the labor demand curve to the right. Decreasing taxes give firms and consumers more after-tax income, thereby increasing their purchasing power and increasing demand for the products that firms produce, shifting the labor demand curve to the right.
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Entrepreneurs obtain control over the resources employed in the projects they undertake by
A) acquiring ownership through investment of their own funds. B) borrowing funds with which to purchase the resources. C) floating new issues of stock or bonds. D) offering credible guarantees to owners of resources. E) reinvesting the profits from previous successful projects.
When we use ordinary least squares to determine the relationship between changes in consumption and changes in both current and lagged income, we find that
A) only current income influences current consumption. B) current income has no impact on current consumption. C) consumption is not affected by income in any quarter. D) current income, last quarter's income, and income two quarter's ago all have the same impact on current consumption. E) current income has a greater impact on consumption than income lagged one quarter.