True or False 1. If short-run equilibrium GDP is above potential GDP, prices wil

Question

True or False

1. If short-run equilibrium GDP is above potential GDP, prices will eventually rise.

2. A tax reduction shifts the consumption schedule downward.

3. A superior level of technology is an important reason the productivity of workers in rich countries is high.

4. A nation's capital consists mainly of stocks, bonds, and other financial assets.

5. Technological change was a major contributor to the productivity speed-up since 1995.

6. A decrease in disposable income causes a shift in the consumption function.

7. If firms are experiencing falling inventories, one can expect that firms will cut production.

8. President Bush in 2001 wanted a tax cut to stimulate consumer spending.

Explanation / Answer

1. False When output is above potential, employment is above the natural level of employment.

2. False Any increase in taxes shifts the consumption schedule downward, and any tax reduction shifts the consumption schedule upward.

3. True   A better educated and trained workforce and superior technology, then we know that country will have more output.

4. False An important role played by financial market is that, they contribute to a nation's growth by ensuring unfettered flow of surplus funds to deficit units.

5. True Improvements in human capital and education played a major role in the productivity improvements of the US economy from 1995

6. False   A decrease in disposable income lead to a downward movement along the consumption function.

7. False With inflexible prices, an unexpected reduction in demand will mean falling sales and initially, a build-up of inventory. If this build-up of inventories persists, firms will respond by cutting production and reducing employment of resources.

8. True Tax cuts will increase consumer spending enough to make up for the revenue loss.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.