A reduction in the marginal propensity to import will cause
A) the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
B) the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output.
C) the multiplier to decrease and a given change in government spending (G) to have a larger effect on domestic output.
D) the multiplier to decrease and a given change in government spending (G) to have a smaller effect on domestic output.
A
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All points below the budget line are
A) inferior to every point on the budget line. B) preferred to every point on the budget line. C) affordable. D) Answers A and C are correct.
How people respond to fiscal policy:
A. is fairly mechanical and appears to conform closely to the predictions of macroeconomic models. B. depends on whether the fiscal policy is financed from borrowing or from budget surpluses. C. depends on their evaluation of the state of the economy and their expectations about the future. D. generally reveals consistent irrationality and poorly-formed expectations about the future.
Twin studies are helpful in producing an unbiased estimate of the returns to schooling, because twins are likely to
A. work in the same occupation. B. earn comparable wages. C. work in the same industry. D. achieve the same amount of education. E. have similar abilities.
If the market equilibrium value of the nominal exchange rate equals 0.20 U.S. dollars per franc, but the franc is officially fixed at 0.25 U.S. dollars per franc, then the franc exchange rate is ________ and to maintain this exchange rate there will be ________ in the government's stock of international reserves.
A. undervalued; a net increase B. overvalued; a net increase C. overvalued; a net decline D. undervalued; a net decline