A temporary tax cut is not likely to be effective in stimulating aggregate demand if:
a. the tax cut is large.
b. the MPC is relatively high.
c. the economy experiences a contractionary gap.
d. the short-run aggregate supply curve is relatively flat.
e. people based consumption decisions on their level of permanent income.
Question 2
Schleppsi, a soft drink maker, is a monopsonist in the county where it manufactures all of the Diet Schleppsi it produces. Suppose the current daily labor cost to the firm is 35,000 with 99 workers and the total wage cost with 100 workers would be 36,000 . What will the market wage be if Schleppsi hires the 100th worker?
a. 35.
b. 36.
c. 100.
d. 350.
e. 360.
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