Private schools are able to exclude students from attending classes they offer unless students have been accepted and paid tuition and fees. This suggests that education is
A. subject to the principle of rival consumption.
B. not subject to the exclusion principle.
C. subject to the free-rider problem.
D. a public good.
Answer: A
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Refer to Figure 8.1. This situation represents a
A) pure coordination game. B) prisoner's dilemma game. C) chicken game. D) battle of the sexes game.
Automatic stabilizers reduce fluctuations in GDP by
a. eliminating spending shocks b. increasing the amount of spending each year c. reducing the additional spending that occurs in each round of the multiplier d. increasing saving e. reducing the need for government involvement in the economy
Answer the following statement(s) true (T) or false (F)
1. When U.S. tourists go abroad, their use of hotels and other services is recorded in service exports in the current account. 2. A current account deficit in the U.S. balance of payments coincides with a financial account surplus. 3. If a U.S. resident obtains a loan from a foreign bank, the transaction is recorded in the financial account of the U.S. balance of payments. 4. When the U.S. balance of payments is zero, then the number of U.S. dollars demanded equals the number of U.S. dollars supplied. 5. A consumer in a foreign country who is buying U.S. goods must sell U.S. dollars to obtain foreign currency to pay for those goods.