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- If the United States introduces universal child care, what will likely happen to GDP? Explain fully why you expect the effect. Will this increase/decrease overall public welfare? Why?Recessions hit parts of the economy differently. What part of the economy is usually hurt the most during a recession? Durable goods. Non-durable goods Consumer non-durable goods Consumer services like dentist appointmentsWhat are the costs associated with large volatility in GDP? bouts of low taxes and high government expenditures bouts of high GDP growth and low inflation rate bouts of high interest rates and high national debt bouts of high inflation and high unemployment rate
- Consumption is an important element of aggregate demand because it A) is the most volatile component of GDP B) accounts for roughly 70 percent of GDP C) is very interest sensitive D) is greatly affected by stock market activity E) all of theseAn economic recession means that _______. a. GDP is critically high b. Output and employment is down c. Employment is increasing d. Output is increasingWhich of the following will NOT lead to an increase in real GDP? A. On average, people in a country decide to increase the number of hours they work by 5%. B. Spending on homeland security increases in response to a terrorist attack. C. The price level and nominal GDP increase by 10%. D. Due to lower interest rates by the Fed investors increase their investmen
- Compare and contrast the effect of expansion and recession on selected variables like output and employment.Which of the following will NOT lead to an increase in real GDP? A. On average, people in a country decide to increase the number of hours they work by 5%. B. Spending on homeland security increases in response to a terrorist attack. C. The price level and nominal GDP increase by 10%. D. Due to lower interest rates by the Fed investors increase their investmentsBased on the data in the table and graph below, identify the equilibrium GDP: Price Level Real GDP/Output in $ billion Real GDP/Spending in $ billion 80 100 180 90 120 160 100 140 140 110 160 125 120 170 115 130 175 105 140 178 100
- What are some example possible reasons for a decline in the level of potential GDP?Identify the point or points for which the following is true: The economy cannot reach this point without an increase in resources or improvement in technologyResearch on the effects of recessions on the real level of GDP shows that recessions cause only temporary reductions in real GDP, which are offset by growth during the expansion phase. recessions cause large, permanent reductions in the real level of GDP. recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary. recessions cause both temporary and permanent declines in real GDP, but most of the decline is permanent.