Suppose the government attempts to stimulate the economy by increasing spending without increasing taxes. Which of the following statements is most likely to be accepted by someone who believes in crowding out?
A) The government's actions will have their intended effect.
B) The government's actions will cause businesses to become more optimistic about the economy, and they will increase their output even more than the government had intended.
C) The government's actions will raise interest rates, causing decreased investment and consumption, and the economy will not expand as much as the government had intended.
D) This is a trick question, because the federal government is required by law to increase taxes by the same amount as it increases expenditures.
C
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Japan and China produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will
A. import guns. B. have a comparative advantage in guns. C. have an absolute advantage in guns. D. have a comparative advantage in rice.
What happens if the price received by a perfectly competitive firm causes it to produce at a quantity where price equals average cost?
a. The firm earns a profit. b. The firm earns no profit. c. The firm earns losses. d. The firm earns little profit.
"One of the failings of a market system is the damage to the environment. Pollution would not exist with a centrally planned economy." Evaluate this statement
To determine the marginal social cost (MSC) of abatement, we find the sum of
a. MPC + MAC b. ?MAC + MCE c. MAC + ?MCE d. MAC + ?MEC