1. If a firm is employing the profit maximizing number of workers, and then output price rises, the firm will respond by laying off workers.
A) True
B) False
2. A supply side economist would most likely support raising the corporate income tax.
A) True
B) False
3. If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
A) the money supply and a decrease in interest rates.
B) government purchases.
C) oil prices.
D) taxes.