When the transmission mechanism breaks down, macroeconomists call this the
A. debt ceiling.
B. crowding in.
C. crowding out.
D. liquidity trap.
Answer: D
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Suppose that Kara values a hot fudge sundae at $6 and Stacia values one at $5 . The pretax price of a hot fudge sundae is $3 . The government imposes a $1 tax on hot fudge sundaes, which raises the price to $4 . What is the deadweight loss from the tax?
In the Keynesian model, if aggregate expenditures exceed aggregate output and inventories of firms fall, then the aggregate output and the business sector could be expected to:
A. increase output. B. decrease output. C. decrease investment. D. hire fewer workers.
An example of a public transfer payment is a(n):
A. veteran's benefit payment. B. airline pass giving price discounts to senior citizens. C. monthly allowance from home for a college student. D. gift of land from a wealthy relative.
If the quantity effect outweighs the price effect of a price increase, then demand is:
A. elastic. B. inelastic. C. normal. D. unit elastic.