An example of a positive externality is
A. Increased business profits at a hardware store that benefited from a tornado.
B. Increased factory use of private sector robotics that came from government research.
C. Increased health problems from air pollution.
D. None of the choices are correct.
Answer: B
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The policy of keeping tax rates stable as government spending fluctuates is known as ________
A) Ricardian equivalence B) tax smoothing C) crowding-out D) a tax smoothie
Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true?
A. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same. B. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. C. Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. D. Investing in Pretty Kitty Grooming offers a higher expected payoff.
The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:
A. fails to hold, and people increase their spending. B. holds, and people save more. C. holds, and people increase their spending. D. fails to hold, and people save more.
Equal increases in government purchases and taxes will:
A. increase the equilibrium GDP and the size of that increase varies directly with the size of the MPC. B. increase the equilibrium GDP and the size of that increase is independent of the size of the MPC. C. increase the equilibrium GDP and the size of that increase varies inversely with the size of the MPC. D. decrease the equilibrium GDP and the size of that decrease is independent of the size of