Author Question: During normal times, discretionary fiscal policy A) is probably not very effective in influencing ... (Read 45 times)

bucstennis@aim.com · **on:** Jun 30, 2018

During normal times, discretionary fiscal policy

A) is probably not very effective in influencing real GDP due to time lags.
B) is more effective in influencing real GDP than automatic stabilizers.
C) works well because there are no lag problems in influencing real GDP.
D) is more effective in influencing real GDP than at times of a recession.

Question 2

Refer to the table below. Given that an individual's opportunity cost of time is 30 per hour, which of the two apartments should she rent?

Apartment Monthly Commuting Time (Hours) Monthly Rent ()
1 60 3,600
2 20 4,500

What will be an ideal response?

sarahccccc · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

The opportunity cost of commuting per month from Apartment 1 = 60 30 = 1,800.
Total monthly cost of renting Apartment 1 = 1,800 + 3,600 = 5,400.
The opportunity cost of commuting per month from Apartment 2 = 20 30 = 600
Total monthly cost of renting Apartment 2 = 600 + 4,500 = 5,100
Therefore, the individual chooses Apartment 2 as she incurs a lower cost if she rents Apartment 2 than when she rents Apartment 1.