Related to the Economics in Practice on p. 710: According to the World Bank, of the following countries, which one has the lowest controls on corruption?
A. India
B. Germany
C. Nigeria
D. China
Answer: C
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One motive for “battling the invisible hand” is
A. unhappiness about the prices that occur in free markets. B. envy toward those who apparently benefit from certain prices. C. a desire to have government “correct” some problems. D. an attempt to produce justice between buyers and sellers. E. All of these responses are correct.
If the economy is at full employment, anything that causes the level of income to change will cause fluctuations in the __________ that will shift the __________ curve and thus help stabilize economic activity
A) price level; IS B) price level; LM C) interest rate; IS D) interest rate; LM
Under the Texas law known as "rule of capture," land owners "get to pump as much of the water under it as they want. . .. 'This means whoever sucks it out first, it's their water'-even if that means there isn't enough left for others." Under this law, pumping large amounts of water:
A. imposes a negative externality on others. B. imposes the free rider effect on others. C. imposes a positive externality on others. D. is a private decision with no effects on others.
Consider a situation with well-behaved international lending between two countries: Atlantica and Pacifica. Assume that Pacifica is wealthier than Atlantica. Illustrate this situation using a graph that relies upon the marginal-product-of-capital curves to show the possible investments in each country according to the returns the investments produce. Use the graph to explain the gains to each country from international lending.
What will be an ideal response?