The multiplier effect demonstrates how initial government purchases ______.
a. are equal to total purchases
b. have no influence on total purchases
c. lead to lower total purchases
d. lead to higher total purchases
d. lead to higher total purchases
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Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?
A) The firm earns zero economic profit. B) Price is equal to average total cost. C) Production occurs at minimum average total cost. D) Marginal revenue is equal to marginal cost. E) Price exceeds marginal revenue.
If a state government finances treatment facilities for alcoholics out of revenues from a tax on liquor, it is
a. basing its taxation on ability to pay b. levying a proportional tax c. able to afford fewer treatment facilities when liquor sales decrease d. discouraging alcoholics from seeking treatment at government facilities e. providing a service that the private sector cannot provide
Assume that the 4K and OLED television sets industry is perfectly competitive. Suppose a producer develops a successful innovation that enables it to lower its cost of production. What happens in the short run and in the long run?
A) Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short-run profits because other firms would also innovate. B) The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. C) This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. D) The firm will be able to increase its economic profits temporarily, but in the long run its economic profits will be eliminated as other firms copy the innovation.
Some economists prefer to look at the distribution of consumption rather than that of income. A Review of Economic Studies article in 2006 reported that consumption inequality in the U.S. is:
A. About the same as the income inequality B. Worse than the income inequality C. Less severe than the income inequality D. Highly unstable from one year to the next