If the Federal government enacts a new excise tax of $1.50 per case of soda. Which of the following is most likely to occur?
a. Consumers of soda will pay a higher price and buy a larger quantity.
b. Consumers of soda will pay a higher price, which will increase the profits of soda companies, inducing them to sell a larger quantity.
c. Consumers of soda will pay a higher price and buy a smaller quantity.
d. Consumers of soda will buy less bottled water.
C
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When government spending is completely crowded out, the economy must have
A) perfect capital mobility. B) floating exchange rates. C) both A and B. D) broken the rules. Government spending cannot be completely crowded out.
An economic model should capture
A) the essential relationships that help to analyze the problem. B) all possible variables that apply to the problem. C) only social value related variables. D) all of the above.
An economy in which output has decreased and prices have increased would suggest that there has been a:
A. positive supply side shock. B. negative supply side shock. C. positive demand side shock. D. negative demand side shock.
If an economy is growing, but experiences no inflation, this means
A. aggregate demand increased, but aggregate supply did not. B. aggregate supply decreased, but aggregate demand did not. C. aggregate demand and aggregate supply increased by the same amount. D. aggregate demand and aggregate supply decreased by the same amount.