Exhibit 16A-3 Macro AD/AS Model
As shown in Exhibit 16A-3, assume the marginal propensity to consume MPC equals 0.80. Using discretionary fiscal policy, federal government spending should be _________ in order to restore the economy from E1to full employment.
A. increased by $2 trillion
B. decreased by $2 trillion
C. decreased by $.40 trillion
D. increased by $.80 trillion
Answer: D
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A collusive agreement between two duopolists is similar to the prisoners' dilemma because in both games
A) the best outcome is always achieved. B) each players strategy depends on what the other player does. C) the Nash equilibrium is not the best outcome for the players. D) All of the above answers are correct.
Suppose that once a well is dug, water flows out of it continuously without any additional effort. Customers collect their water and pay a per gallon fee when they leave the site of the well. In the short run, the competitive firm in this market
A) will not shut down because variable costs are zero. B) has no fixed costs. C) faces diminishing marginal returns. D) can act as a price setter.
The Federal Reserve System is owned by:
a. federal government agencies such as the Treasury. b. the Congress of the United States. c. the banks that are members of the Federal Reserve System. d. anyone who buys stock over the counter. e. people who have deposits in member banks.
Perfectly competitive firms
A. are large relative to the size of the market. B. sell identical products. C. are price makers. D. All of the above are correct.