During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?
A) increase government expenditure, decrease taxes, increase the quantity of money
B) increase government expenditure, decrease taxes, decrease the quantity of money
C) decrease government expenditure, increase taxes, decrease the quantity of money
D) do not change government expenditures or taxes , increase the quantity of money
E) decrease government expenditures, increase taxes, do not change the quantity of money
Question 2
Refer to the figure above. Which of the following methods is the best to compensate the losers from opening Lithasia to international trade?
A) Sellers in Lithasia could be taxed and the revenue could be used to compensate buyers.
B) Buyers in Lithasia could be taxed and the revenue could be used to compensate sellers.
C) Both buyers and sellers could be taxed and the revenue could be retained by the government.
D) The sellers in Lithasia could sell the pens at a price above the equilibrium price in the domestic market.
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