Question

1. The reason for the different in tax policy and spending policy by the government is...

1. The reason for the different in tax policy and spending policy by the government is due to:

a. people not responding to tax policy as much as spending policy.

b. the fact that when the government engages in spending policy, they do it more aggressively.

c. firms drastically responding to tax changes that are implemented.

d. the difference in initial spending that results from engaging in tax policy.

2. In macroeconomics, the long run is determined by:

a. how long it takes for prices of inputs to adjust through the whole economy.

b. how long it takes for firms to vary all input quantities.

c. the longest contract length of a business.

d. how long it takes for output decisions to adjust to changes in economic conditions.

3. When a borrower fails to pay back a loan according to the agreed-upon terms, it is called:

a. credit risk.

b. default.

c. opportunity cost.

d. inflation.

4. Intermediation in the financial system is the process of:

a. bringing together buyers and sellers in a market.

b. negotiating terms of repayment when agreements between buyers and sellers are in default.

c. government intervention in a financial market.

d. an arbitrator working with government and private firms to create an efficient financial system.

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Homework Answers

Answer #1

1> b. the fact that when the government engages in spending policy, they do it more aggressively.

Government engages in spending policies and they can shift the GDP or AE faster than changes through taxes.

2> a. how long it takes for prices of inputs to adjust through the whole economy.

In the long run, price, wage gets adjusted to the economic situation, so the period by which the price level gets adjusted to the economic situation is generally referred to as the long run.

3> b. default.

When a borrower fails to pay back as per the contract, that is known as default.

4> a. bringing together buyers and sellers in a market.

In finance, a financial intermediary works as a middleman among diverse parties in order to facilitate financial transactions.

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