In general, an increase in the price of a good:
A. will cause both an income and substitution effect.
B. usually will have no effect.
C. will cause the income effect to be bigger than the substitution effect.
D. will cause the substitution effect to be bigger than the income effect.
Answer: A
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Which of the following is true about growth rates?
a. in recent decades, the rich countries of the world have consistently grown more rapidly than poor countries. b. no less developed country (LDC) was able to achieve a more rapid growth rate than the United States during the 1980 through 2005 period. c. during recent decades, most LDCs have stagnated economically. d. during 1980 through 2005, the fastest growing countries in the world were mostly LDCs.
A natural monopoly that is regulated to set price equal to marginal cost
A) makes an economic profit. B) makes zero economic profit. C) incurs an economic loss. D) could make an economic loss, an economic profit, or zero economic profit. E) makes zero normal profit.
A $10 million open market purchase will increase the monetary base by
A) $10 million. B) $10 million times the money multiplier. C) $10 million divided by the money multiplier. D) an amount between $0 and $10 million, depending on the fraction of the purchase the public wishes to hold as currency.
Assume that an inflationary gap must be closed by reducing aggregate expenditures. If consumers refuse to cut spending on consumption and producers won't cut demand for investment goods, the President:
a. can do nothing. b. must build more roads. c. must borrow from Wall Street. d. must increase Social Security expenditures. e. must cut government spending.