![]() ![]() 75, then a $50 billion increase in investment would result in an increase in GDP ofĭ) $200 billion. B The paradox of thrift refers to the idea thatĪ) people who save are usually those who cannot afford it.ī) as people become more thrifty, incomes may fall.Ĭ) the thrift industry (banks and savings and loans) wants some people to save so that others may borrow.ĭ) saving is necessary for economic development.Į) equilibrium requires aggregate supply and total expenditures to be equal. E The multiplier effect occurs becauseĪ) businesses copy the spending decisions of their competitors.ī) increases in income cause a chain reaction of spending by many businesses and individuals.Ĭ) households tend to spend any increase in income.ĭ) increases in income cause tax revenues to increase, thereby stimulating increases in government spending levels.Į) as saving levels increase, a greater pool of loanable funds is available for investment spending by businesses. D Even if the economy has considerable excess capacity, new government spending that creates new jobs involves opportunity costs becauseĪ) excess capacity implies that the capital stock exceeds equilibrium.ī) government employment is inefficient relative to jobs in the private sector.Ĭ) expansionary monetary policy stimulates employment without growth of national debt.ĭ) unemployed workers are unwilling to surrender leisure time to take paid jobs.Į) goods other than those purchased by government could have been produced and consumed. A Interest rates in the United States would have been higher in recent years had it not been forĭ) the inflow of funds from foreigners. B Two ways to lower the deficit are toĪ) raise taxes and lower government spending.ī) lower taxes and raise government spending.Ĭ) lower taxes and lower government spending.ĭ) raise taxes and raise government spending. C Right now our national debt isĮ) between $11 and $12 trillion. ![]() ![]() If our unemployment rate were eight percentĪ) there is definitely an inflationary gap.Ĭ) there is definitely a recessionary gap.ĭ) there is probably an inflationary gap. ![]()
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