Firm A finds it very expensive to reduce its sulfur dioxide emissions, while Firm B finds it very cheap to reduce its sulfur dioxide emissions. If a program of tradable pollution permits was enacted, we would most likely see
A. Firm A reduce its emissions by more than Firm B.
B. Firm B sell its permit to pollute to firm A.
C. Both firms decrease their sulfur dioxide emissions by the same amount.
D. Both firms increase their sulfur dioxide emissions by the same amount.
Answer: B
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You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion, (2) investment = $40 billion, (3) government purchases = $90 billion, and (4) net exports = $25 billion. If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP-gap here?
A. A decrease in government purchases and an increase in taxes B. An increase in government purchases and a decrease in taxes C. An increase in government purchases and taxes D. A decrease in government purchases and taxes
How might a U.S. federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S. dollar.)
A) A federal budget surplus raises interest rates, which raises exchange rates, and increases the balance of trade. B) A federal budget surplus reduces interest rates, which raises exchange rates, and reduces the balance of trade. C) A federal budget surplus raises interest rates, which raises exchange rates, and reduces the balance of trade. D) A federal budget surplus reduces interest rates, which reduces exchange rates and increases the balance of trade.
When output is below potential and the policy rate has hit the floor of zero, the resulting fall in inflation leads to ________ real interest rates, which ________ output further, which causes inflation to fall further
A) lower; increase B) higher; depress C) higher; increase D) lower; depress
The margin requirement set by the Federal Reserve is the
A) proportion of the purchase price of a security that an investor must pay in cash. B) difference between the interest rate banks may charge on loans and the interest rate they receive from deposits. C) same thing as the required reserve ratio on deposits. D) difference banks must maintain between the value of their assets and the value of their liabilities.