Author Question: The government has decided to give every person in the U.S. a 5 coupon that they can use at the ... (Read 76 times)

Beheh · **on:** Jun 30, 2018

The government has decided to give every person in the U.S. a 5 coupon that they can use at the grocery store to purchase their choice of cheese. We would expect this policy to lead to

A) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset.
B) no increase in aggregate demand because there would be no direct expenditure offset.
C) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable.
D) no increase in aggregate demand due to the Ricardian equivalence theorem.

Question 2

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

A) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family.
B) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns.
C) The Keynesian model assumes that the level of real GDP is inflexible.
D) The Keynesian model assumes that nominal wages are inflexible downward.