In a large country, the effect of a given change in government spending
A) on output is large and the effect on the trade balance is small.
B) on output is large and the effect on the trade balance is large.
C) on output is small and the effect on the trade balance is small.
D) on output is small and the effect on the trade balance is large.
A
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Which of the following correctly explains the role of the government in a free market?
A) The government acts as a referee by enforcing contracts and preventing stealing. B) The government sets prices according to the relative value of each good. C) The government allocates goods to those buyers who value the goods the most. D) The government sets production quotas for sellers in the market.
Comment on the following statement: "A decrease in supply will lead to an increase in the price which decreases demand, thus lowering price. Therefore, a decrease in supply has no effect on the price of a good."
What will be an ideal response?
The convergence theory is based on the idea of:
A. decreasing marginal returns. B. decreasing income per capita. C. increasing rates of income per capita. D. increasing opportunity costs.
In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could
a. better monitor the agent. b. pay the agent above-equilibrium wages. c. delay payment to the agent. d. stop paying bonuses.