Real disposable income for a household equals
a. the real return on capital services.
b. real income available after taxes.
c. the nominal wage rate.
d. the real return on capital services after taxes.
Answer: b. real income available after taxes.
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Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $A. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted. If _______, then abatement would be efficient.
A. A < 300,000 B. A > 100,000 C. A < 100,000 D. A < 400,000
Which best describes a credit default swap?
A) It is designed to reduce interest-rate risk. B) The issuer receives payments from the buyer in return for agreeing to make payments to the buyer if the security goes into default. C) Issuers are taking out insurance in case of default. D) It represents a way for the issuer to establish its creditworthiness.
The total gains from trade within a price system is
A) the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. B) the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. C) the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. D) always equal to zero.
Which of the following would increase aggregate demand?
a. A deficit in the government budget b. An increase in taxes c. An increase in government borrowing d. A surplus in the government budget e. A decrease in government spending