Sometimes the government deals with externalities by creating laws to regulate behavior instead of using taxes to correct the market failure. So, requiring auto manufacturers to install a device called a catalytic converter which removes some toxins from exhaust may be preferable to a gas tax that reduces driving levels. This route is often preferred because:
a. c and e.
b. it requires less technological development.
c. it doesn't penalize drivers of clean cars.
d. only car drivers pay for the externality.
e. the cost of the externality is unknown.
a
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During the financial crisis of 2008, the fall in consumer spending:
A. prompted many firms to increase their output. B. allowed many firms to increase investment spending. C. forced many firms to lay off their workers. D. enabled many firms to increase their prices.
A balanced budget is present when:
A. the economy is at full employment. B. the actual level of aggregate spending equals the planned level of spending. C. public sector spending equals private sector spending. D. government revenues equal government expenditures.
If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS) curve must be
A. downward sloping. B. horizontal. C. vertical. D. upward sloping.
Holding all other prices and money income constant, if the price of food rises, then the consumer will adjust her expenditures and
A) reach an optimum on a higher indifference curve. B) reach an optimum on a lower indifference curve. C) reach an optimum on the same indifference curve. D) her level of satisfaction may go up or down.