economics hw help

If the multiplier during a recession is equal to 2, then if the government wants to increase GDP by $500 billion it should increase spending by:

A. $100 billion. B. $200 billion. C. $250 billion D. $1 trillion

Assuming that there is no government spending or trade, an economyâs aggregate demand is given by its domestic consumption C and investment I, AD = C + I = c0 + c1Y + I.

In the economyâs goods market equilibrium this equals its output: AD = Y. Solving for Y this yields:

Y = [1/(1-c1)] (c0+ I)

Given this equation, which of the following statements is correct?

A.

The multiplier is given by 1 â c1.

B.

The boost in the economyâs output is the same whether the aggregate demand shock comes from an increase in investment I or in autonomous consumption c0.

C.

The larger the marginal propensity to consume c1, the smaller the multiplier.

D.

If c1 = 1/3, then a £1 million increase in investment would result in a £2 million increase in the output.

Assume that in France and Germany, it is not possible for a household to increase its borrowing based on an increase in the market value of their house. In addition, a large down-payment (as a per cent of the house price) is required for house purchase. On the basis of this information, which of the following statements is correct when there is a rise in the house price?

A. There is a positive financial accelerator effect for the existing homeowners who are credit-constrained. B. Would-be homeowners would increase saving, leading to their reduced consumption. C. A rise in the house price leads to an increase in human capital.

D. A rise in the house price is likely to lead to an increase in consumption in France and Germany

In the US and the UK, loans are widely available based on a rise in home equity. Additionally, unlike in France and Germany where large downpayments (as a percentage of the house price) are required, in the US and the UK only small downpayments are required for house purchases. On the basis of this information, which of the following statements is correct for the US and the UK when there is a rise in the house price?

A. There is a positive financial accelerator effect for the existing homeowners who are credit-constrained. B. There would be no effect on the consumption of the existing homeowners who are not credit-constrained. C. Would-be homeowners would increase saving and reduce their consumption more than they would in France and Germany. Which of the following statements is correct regarding the multiplier? A. If two countries were identical except for the share of credit-constrained households, then the country with the higher share would have a smaller multiplier. B. The multiplier is constant over a business cycle. C. An increase in export leads to a higher multiplier. D. Taxation and imports are âleakagesâ from the circular flow of income, which contributes to lowering of the multiplier. D. A rise in house price is likely to dampen consumption in the US and the UK.

Given that imports represent a "leakage" out of the economy and reduce the multiplier, if the following countries have the given rates of Imports/GDP which is likely to have the largest multiplier (assuming all else is the same):

table {}

CountryImports/GDPBelgium82.1Canada33.4Denmark46.6Ireland96.7Netherlands71.4 A. Belgium B. Canada C. Ireland D. Netherlands

Which of the following statements is correct regarding fiscal policy?

A. Expansionary fiscal policy (e.g. increasing the government deficit or reducing the surplus) always has a stabilizing effect for the economy. B. Unemployment benefits and taxes automatically increase government spending and cut taxation in a downturn, while they trim spending and raise taxes in a boom. These are, therefore, automatic stabilizers. C. In a recession the aim of a government fiscal expansion is to over-ride the effects of automatic stabilizers. D. As a family worried about mounting debts should cut spending and save more, so should an economy adopt austerity measures when its debt level is high to restore its public finances to balance.

Which of the following statements is correct regarding inflation and deflation?

A. Borrowers benefit from deflation as the value of their debt decreases in real terms. B. Inflation transfers wealth from lenders to borrowers. C. Falling prices benefit consumers and are therefore always good for the economy. D. Inflation makes it difficult for consumers and firms to attain the message about scarcity of resources (sent by relative prices) and is therefore always bad for the economy.