A merit good is
A. A good society holds to a higher standard in tax regulations.
B. Income payments for which no goods or services are exchanged.
C. A good or service that society believes everyone is entitled to a minimal quantity of.
D. A product that serves as an incentive to produce more output.
Answer: C
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If disposable income increases by $400 billion and consumption increases by $300 billion, the MPC equals
a. 0.75 b. 0.60 c. 0.80 d. 0.68
Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?
a. GDP would definitely increase, despite the fact that GDP includes leisure. b. GDP would definitely increase because GDP excludes leisure. c. GDP could either increase or decrease because GDP includes leisure. d. GDP could either increase or decrease because GDP excludes leisure.
At the beginning of 2006 the CPI was 216.2. At the beginning of 2007, it was 225.1. What was the rate of inflation in 2006?
A. 4.1 percent. B. 8.9 percent. C. 3.6 percent. D. 4.9 percent.
If a point lies on the monetary policy reaction curve, and at this point the inflation rate equals the target rate of inflation, we know that:
A. the real interest rate corresponding to this point is below the long-run real interest rate. B. current output is above potential output. C. the real interest rate corresponding to this point is equal to the long-run real interest rate. D. the real interest rate corresponding to this point is above the long-run real interest rate.