The creation of private property rights corrects negative externality problems in many cases because they
a. cannot create negative externalities
b. create a strong incentive for the private owners to maintain the property
c. can force the government to compensate the owners for the externality costs
d. encourage people to become free riders
e. always lead to the social optimal price and output levels
B
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Refer to Figure 21-3. Which of the following is consistent with the graph depicted above?
A) Taxes are changed so that real interest income is taxed rather than nominal interest income. B) Technological change increases the profitability of new investment. C) The government runs a budget deficit. D) An expected recession decreases the profitability of new investment. Figure 21-4
If the Fed wanted to prevent a change in money demand from affecting real GDP, which of the following responses would it choose?
a. A neutralization response b. A constant interest rate response c. A constant money supply response d. A constant tax rate response e. A constant government spending response
Within the framework of the AD/AS model, if consumers and investors become more pessimistic about the future direction of the economy, this will lead to
a. an increase in aggregate demand. b. a decrease in aggregate demand. c. an increase in long-run aggregate supply (LRAS shifts to the right). d. a reduction in the natural rate of unemployment.
All of the following would show a more equal distribution than the distribution of money income EXCEPT
A. after-tax income. B. lifetime earnings. C. total income. D. wealth.