Suppose that for Emily, DVDs and trips to the movie theater are perfect substitutes. Currently, Emily is spending all of her income on trips to the movie theater. If the price of DVDs doubles, the substitution effect will
a. be two times the income effect.
b. be half the income effect.
c. be zero.
d. always increase the number of trips to the movie theater Emily makes.
c
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It is possible for an economy to keep its currency overvalued against the dollar if:
A) it sells the domestic currency in the foreign exchange market. B) it has substantial domestic currency reserves. C) it buys the dollar in the foreign exchange market. D) it has substantial dollar reserves.
Between 1981 and 2012, the United States
A) had a current account surplus almost every year. B) some years had a deficit and some years had a surplus that totaled a surplus of $2.5 trillion. C) had a current account surplus or deficit that almost equal to $0 every year. D) had a current account deficit almost every year. E) some years had a deficit and some years had a surplus that netted out to $0.
To combat a recession, Keynesian fiscal policy recommends:
a. an increase in taxes. b. an increase in government spending. c. an increase in taxes and a decrease in government purchases to balance the budget. d. a reduction in both taxes and government spending.
When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?
A) $2 B) $0.5 C) $6 D) $3