The fraction of additional income spent on imports is called the marginal propensity to import
Indicate whether the statement is true or false
TRUE
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Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B
An asset price "bubble" is created when
A. buyers base their purchase decision upon their expectation that the asset's price will rise. B. buyers base their purchase decision upon solid fundamentals. C. sellers base their sale decision upon their expectation that the asset's price will fall. D. sellers base their sale decision upon solid fundamentals.
If U.S. residents boycotts French goods, this will
A) reduce the demand for euros in the foreign exchange market. B) increase the demand for euros in the foreign exchange market. C) cause the euro to appreciate. D) have no effect on the euro.
Firms may react to a payroll tax by
A. substituting labor for capital. B. shifting to less capital intensive techniques. C. hiring more labor. D. reducing their output.