Log in
Economics
1
answer
0
watching
259
views

Assume the economy is experiencing an inflationary gap, classical economists believe that:

a. flexible wages will restore full employment.

b. the federal government should decrease spending to shift the aggregate demand curve leftward.

c. the Federal Reserve should lower the interest rate.

d. the federal government should increase spending to shift the aggregate demand curve rightward.

Watch
1
answer
0
watching
259
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Vaishali Yadav
Vaishali YadavLv10
20 Nov 2020

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

1) If actual (equilibrium ) real GDP is less than the full-employment, or natural, level of real GDP, then wages and other input prices are expected to:

a. fall and SRAS to shift to the left until long-run equilibrium is achieved.

b. fall and SRAS to shift to the right until long-run equilibrium is achieved.

c. rise and SRAS to shift to the left until long-run equilibrium is achieved.

d. rise and SRAS to shift to the right until long-run equilibrium is achieved.

2) In a self-regulating economy, inflationary gaps are automatically eliminated in the long run by:

a. decreases in wage rates that cause short-run aggregate supply to shift rightward.

b. decreases in wage rates that cause short-run aggregate supply to shift leftward.

c. increases in wage rates that cause short-run aggregate supply to shift rightward.

d. increases in wage rates that cause short-run aggregate supply to shift leftward.

3) Assume the economy is initially in equilibrium at the full-employment level of real GDP. If businesses and consumers become pessimistic regarding future economic conditions, ceteris paribus, the aggregate demand curve will shift to the ________, causing the level of output to ______.

a. left; fall

b. right; fall

c. left; rise

d. right; rise

4) Economists that advocate a macroeconomic policy of laissez-faire:

a. believe the economy is self-regulating only if the government intervenes to move the economy to equilibrium at natural real GDP.

b. believe the economy is self-regulating and will automatically move to equilibrium at natural real GDP in the long run.

c. also advocate central planning and government control of resources.

d. also advocate active government intervention in the economy.

5) Which of the following summarizes the process for closing a recessionary gap if the economy is self-regulating?

a. Labor shortages put upward pressure on wages, which leads to higher costs of production and a decrease in short-run aggregate supply.

b. Labor shortages put downward pressure on wages, which leads to increases in employment and spending and an increase in aggregate demand.

c. Unemployed resources put upward pressure on the price level, which leads to higher wages, increases in spending, and increases in aggregate demand.

d. Unemployed resources put downward pressure on the price level, which leads to lower costs of production and an increase in short-run aggregate supply.

Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.
 
a) By how much would government spending have to increase to shift the aggregate demand curve rightward by $25 billion?
b) How large a tax cut would be needed to achieve the same increase in aggregate demand?
c) Determine one possible combination of government spending increases and tax decreases that would accomplish the same goal. 

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume(MPC) is 0.75, and the government follows Keynesian economics by following expansionary fiscal policy to increase aggregate demand (total spending). If an increase in $1000 billion aggregate demand can restore full employment, the government should:

a. increase spending by $250 billion. 

b. decrease spending by $750 billion. 

c. increase spending by $1000 billion. 

d. increase spending by $750 billion. 

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in