Suppose that the government decided to increase interest rates in order to encourage saving. Would this likely lead to an increase in investment and higher future economic growth rates? Explain.
What will be an ideal response?
No. The increase in interest rates might encourage more saving (less present consumption) but not more investment. The opportunity cost of the funds would rise, and make it more difficult to pay back borrowed money than if interest rates were lower. Most likely, investment would decrease instead of increase.
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Tariff revenue is an important source of operating revenue for many governments of high income countries
Indicate whether the statement is true or false
If the absolute price elasticity of demand for a product is less than 1, then
A. consumers are relatively insensitive to price changes. B. there is a positive relationship between price changes and the quality of the product. C. consumers are relatively sensitive to price changes. D. producers are relatively insensitive to price changes.
If both frictional and structural unemployment increased, the natural rate of unemployment:
a. Would increase b. Would not change c. Would decrease d. Would be affected in an unpredictable manner
The average tariff rate in the US today is about 40 percent, but it was only 1.6 percent in 1946
Indicate whether the statement is true or false