In a situation where information is costly to acquire and individuals must spend time searching for jobs, which type of unemployment will result?
Answer(s): C
Frictional unemployment is due to constant changes in the economy that prevent qualified unemployed workers from being immediately matched up with existing job opening. It results from the scarcity of information and the search activities of both employers and employees for information that will help them make better employment choices.
Which of the following would be considered non-activist monetary policy?
Answer(s): D
An activist monetary policy involves a changing policy in reaction to economic events. A classic example of non-activist policy would be one that increases the money supply by a certain amount each year.
In the Keynesian aggregate expenditure model, the larger the marginal propensity to consume,
The expenditure multiplier is found by M = 1/(1-MPC). Thus, the larger the MPC the larger the multiplier. The multiplier magnifies changes in aggregate expenditure into larger changes in aggregate output. the larger the multiplier then, the greater the change in income derived from a given change in private investment.
When financing a budget deficit, the government might borrow money from ________.
The government can borrow money from the central bank, from private businesses, private citizens and foreigners.
If consumption equals 1,100 when disposable income is 1,200 and increases to 1,400 when disposable income goes to 1,600, what are the marginal propensities to consume and to save?
Since the MPC is determined according to the ratio: MPC = additional consumption divided by additional income, the MPC here equals: 300/400 = .75. MPS = 1-MPC so MPS = .25.
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