In a country without foreign trade and no income taxes, if the government increases autonomous taxes by 1000 and the MPS is 0.1, then the initial or first round change in expenditures by all tax payers will be
A) a reduction equal to 1000.
B) an increase equal to 1000.
C) a reduction equal to 900.
D) an increase equal to 900.
C
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If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is
A) -3 percent. B) -2 percent. C) 3 percent. D) 7 percent.
If the current allocation of resources in the market for hammers is inefficient, then it must be the case that
a. producer surplus exceeds consumer surplus in the market for hammers. b. consumer surplus exceeds producer surplus in the market for hammers. c. the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. d. the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.
Assume Victoria's indifference curves are bowed outward but her indifference curves satisfy the other three properties of indifference curves. As Victoria moves from right to left along the horizontal axis, her marginal rate of substitution
a. increases. b. decreases. c. remains constant. d. increases, then decreases.
Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:
A. exports decrease. B. consumption spending increases. C. investment decreases. D. imports increase.