Question

According to Neoclassical economists the following is a means to stimulate economic growth?

government spending to increase demand

high taxes

low taxes

The Phillips curve illustrates a trade-off between ________ and ________.

the natural rate of unemployment rate; the actual unemployment rate

the natural rate of unemployment; inflation

unemployment; inflation

The theory of ________ assumes that individuals will use all information available to them to form the most accurate possible expectations about the future.

答案选项组

rational expectations

Keynesian economics

adaptive expectations

Which of the following more than likely caused housing prices to fall after the media reported about the subprime mortgage crisis?

答案选项组

neoclassical theory

rational expectations

cyclical expectations

From a Keynesian view, during a recession, government investment in physical capital

答案选项组

always generates positive returns to investment.

has no risk of crowding out private investment in physical capital.

helps increase the output and productivity of an economy.

Tax cuts that are explicitly temporary have less impact than permanent ones because

答案选项组

temporary tax cuts are usually smaller than permanent ones.

temporary tax cuts always have less effect on the budget deficit than permanent ones do.

individuals and businesses do not change their behavior very much, since they do not expect the tax cuts to last.

Answer 1

1. C. low taxes

Neoclassical economics believe in as less government intervention as possible. Therefore, the lower the taxes the lower the interference of government in market mechanism.

2. C. unemployment; inflation

The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.

3. A. rational expectations

The theory of rational expectations believes that when making decisions, individual agents will base their decisions on the best information available and learn from past trends.

4. B. rational expectations

5. C. helps increase the output and productivity of an economy.

6 C. individuals and businesses do not change their behavior very much, since they do not expect the tax cuts to last.

A temporary tax cut or spending increase will explicitly last only for a year or two, and then revert back to its original level. A permanent tax cut or spending increase is expected to stay in place for the foreseeable future. The effect of temporary and permanent fiscal policies on aggregate demand can be very different. Most people and firms will react more strongly to a permanent policy change than a temporary one.