Answer:
The correct answer is option A.
Explanation:
In the time of recession expansionary policy is required to boost the economy. An expansionary fiscal policy such as a reduction in tax will be helpful. A tax cut will cause an increase in disposable income. This will cause aggregate demand to rise. Consequently, output and employment will increase.
Similarly, in times of inflation, a contractionary policy will be required to eliminate inflationary pressures. A decrease in government spending would lead to a decrease in aggregate demand. This will cause the price level to get reduced.
Thus an economist would recommend tax cuts in case of recession and reduction in government spending in case of inflation.
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Answer:
a. $60,000
Explanation:
Costs of goods sold = Budgeted sales for next month * 40%
Costs of goods sold = $150,000 * 40%
Costs of goods sold = $60,000
So therefore, the cost of goods sold for next month is expected to be $60,000.
Answer:
drives the interest rate up.
Explanation:
A budget deficit is the amount by which spending exceeds income.
Other things equal, an increase in the government budget deficit drives the interest rate up.
Generally, when there's a deficit in government budget, they resort to borrowing money from creditors. This creditors are likely to be sceptical about the government's ability to repay the debt and at such would increase the interest rate.
Answer:
Economist Brown : Perfectly Inelastic (Vertical) Aggregate Supply
Economist Black : Perfectly Elastic (Horizontal) Aggregate Supply
Explanation:
Economy is at equilibrium where : Aggregate Demand = Aggregate Supply.
Aggregate Demand is downward sloping curve, as aggregate demand is inversely related with price. Increase in AD shifts the AD curve rightwards.
Aggregate Supply is usually upward sloping curve, as it is directly related to price. However, as per given special cases by Economists Black & Brown, it is as undermentioned :
- Black : AD increase (rightwards shift) increases only price if - Aggregate Supply is perfectly inelastic i.e non respondent to price & AS curve is vertical.
Real GDP is the total value of goods & services produced by an economy, valued at constant base prices. Increase in real GDP implies increase in production quantity.
- Brown : AD increase (rightwards shift) increases only Real GDP (quantity) if - Aggregate Supply is perfectly elastic (infinitely respondent to price, so prices constant) & AS curve is horizontal.