Suppose the government spends $10 billion subsidizing firms producing electricity with wind turbines because these firms are high cost producers. Will the subsidies lead to economic growth and higher income levels?
A) No, the turbines are an inefficient form of producing electricity and therefore the subsidies will increase the opportunity cost of supplying it.
B) Yes, because more people will be employed by the firms producing electricity with wind turbines.
C) Uncertain, higher income levels will be achieved if the employment of the firms producing electricity with the wind turbines expands; if not, incomes will fall.
D) Yes, because the government will be able to finance the subsidies without reducing private sector output.
A) No, the turbines are an inefficient form of producing electricity and therefore the subsidies will increase the opportunity cost of supplying it.
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If a currency increases in value as a result of government decree rather than market forces, the process is known as
A. reflation. B. revaluation. C. appreciation. D. value-added.
The basic purpose of financial markets is:
A. match people who want money to spend now with people who want to save their money for later. B. buy and sell different currencies in order to make a profit. C. sell commodities to firms as inputs. D. buy commodities from firms and the government to sell to the public.
Suppose a parent company producing sportswear decides take back some formerly franchised outlets and operate them with its own employees. This form of vertical integration will allow the parent company:
a. to practice price discrimination. b. to charge a uniform price for its products across the globe. c. to lower its costs of operation and increase sales. d. to test operating techniques that might make the franchisees bettor competitors.
Automatic stabilizers
A. are probably insufficient to completely offset strong recessionary pressures. B. tend to accelerate abrupt changes in economic activity and cause expenditures to move pro-cyclically. C. give policy makers more time to formulate nondiscretionary policy. D. are unimportant to those workers most likely to be laid off or otherwise harmed by recessions.