Which of the following would reduce the ability of the self-correcting mechanism to direct an economy out of a recession quickly?
a. a decrease in the real rate of interest
b. resource prices that are inflexible in a downward direction
c. an increase in aggregate demand
d. a low level of savings
B
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As the tax wedge associated with a given economic activity gets smaller, we would expect
A) more of that economic activity to occur. B) people to engage in less of that particular activity. C) the distortions caused by taxes on that activity to be greater. D) no change in the practice of that activity until the tax wedge ultimately disappears.
The purchase of a virtual item from an online company with a virtual currency causes the nation's:
a. Monetary base to fall. b. M2 money supply to fall. c. M2 money multiplier to remain the same. d. M2 money supply to rise.
The budget of an unconstrained government is similar to a common pool resource, and this will lead to
A) lower interest rates and spending levels consistent with economic efficiency. B) excessive spending and budget deficits. C) lower taxes and a deficient level of spending. D) a deficient level of spending and budget surpluses.
The inflow of foreign investment into the United States
A. Signals a lack of confidence in the U.S. economy. B. Has no effect on the U.S. economy. C. Diminishes production possibilities for the United States. D. Stimulates more economic growth for the United States.