In Figure 5.1, the marginal utility of income is
A) increasing as income increases.
B) constant for all levels of income.
C) diminishes as income increases.
D) None of the above is necessarily correct.
A
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Explain how tax revenue can be both an automatic fiscal policy and a discretionary fiscal policy
What will be an ideal response?
A new law applied to a competitive market that requires laid off workers be paid a large severance payment will
A) not generate a deadweight loss. B) increase total welfare. C) increase consumer surplus in the market. D) decrease consumer surplus in the market.
An expansionary fiscal policy is likely to
A) decrease a government budget surplus (or increase a budget deficit) and increase borrowing by the Treasury which will sell more bonds. B) increase a government budget surplus (or increase a budget deficit) and decrease borrowing by the Treasury which will buy more bonds. C) increase a government budget surplus (or increase a budget deficit) and increase borrowing by the Treasury which will sell more bonds. D) decrease a government budget surplus (or increase a budget deficit) and decrease borrowing by the Treasury which will buy more bonds.
Assume the following: (1 ) the real cost of a unit of capital is one; (2 ) the unit of capital is expected to increase a firm's real profit by $10,000 each year, and depreciate by 8% each year (? = .08); and (3 ) The real interest rate is 2% (r = .02). What is the "user cost" or "rental cost" of this unit of capital?
A) .02 B) .06 C) .10 D) .08/.02 = 4 E) none of the above