Question Details

What effect would a higher savings rate have on the recession 



1. "Under present circumstances there is such a thing as a 'free lunch'. In effect, all of the ingredients of that lunch are already there - the people who want to work, the factories and equipment standing idle, and the raw materials not being used. It is just a question of injecting a little spending power to prevent the free lunch from going to waste." What would happen if this policy of injecting a little spending power were undertaken without the ingredients listed above? 
a) higher inflation b) higher tax rates 
c) higher unemployment d) more discouraged workers 
2. "Most economists these days are preaching that consumers had better start spending. Fears of unemployment have curtailed consumer spending and starved the federal government of tax revenues needed to reduce the deficit." Does the fact that unemployment fears curtail consumer spending serve to stabilize or destabilize the economy? 
a) stabilize because the lower consumer spending prevents inflation 
b) destabilize because the lower consumer spending makes unemployment worse 
c) destabilize because the lower consumer spending offsets the multiplier process 
d) stabilize because the lower consumer spending reinforces the multiplier process 
3. "Changes in inventories go a long way, for instance, toward explaining why first-quarter real GNP was ahead of a year earlier by a meagre 1.7 percent." What must have been happening to inventories during the first quarter? 
a) rising because of unexpectedly-high output 
b) falling because of unexpectedly-low output 
c) rising because of unexpectedly-low aggregate demand 
d) falling because of unexpectedly-high aggregate demand 
4. "Economists expect to see some further liquidation of inventories this quarter, but at a slower rate. And that change from rapid to slow - from negative to less negative - shows up as a plus for the economy." This is a plus for the economy because 
a) it means that output is increasing b) it means that aggregate demand is increasing 
c) businesses are more profitable with less inventories 15 
d) it means that investment in inventories should increase 
5. "We saved 17 percent of our disposable income during the recession, the highest rate since World War II. The level of savings has fallen off since then to less than 10 percent of disposable income." What effect would a higher savings rate have on the recession ? 
a) it would not affect the recession b) it would make the recession less severe 
c) it would make the recession more severe 
d) it would have no predictable effect on the recession




Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help