Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75 . Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should
the government do if it wants to offset the decrease in real GDP?
a. Raise both taxes and expenditures by $80 billion dollars.
b. Raise both taxes and expenditures by $10 billion dollars.
c. Reduce both taxes and expenditures by $80 billion dollars.
d. Reduce both taxes and expenditures by $10 billion dollars.
a
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Which of the following equations is correct?
A) assets = liabilities ? net worth B) assets = liabilities + net worth C) liabilities = assets + net worth D) net worth = liabilities + assets
The concerns about world food production raised by Malthus have not materialized because:
A) input prices have fallen over time. B) crop prices have risen over time. C) Malthus was wrong about the diminishing returns to labor in agriculture. D) technological improvements have increased our ability to produce food over time.