Which of the following would be considered a fiscal policy action?
A) The Fed increases the money supply.
B) Tax incentives are offered to encourage the purchase of fuel efficient cars.
C) Spending on the war in Afghanistan is increased to promote homeland security.
D) A tax cut is designed to stimulate spending during a recession.
Answer: D
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Which of the following will shift an economy's production possibilities curve inward?
A. an improvement in technology B. an increase in the unemployment rate C. a decrease in land, labor or capital D. a decrease in the unemployment rate
People will consistently sit through terrible movies at the theater instead of leaving early. This behavior makes no sense because it implies people are:
A. ignoring sunk costs, which is irrational. B. focusing on sunk costs, instead of thinking at the margin. C. thinking at the margin, instead of focusing on sunk costs. D. not thinking at the margin, which is rational.
The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
a. goods are scarce. b. people face tradeoffs. c. income must be earned. d. households face many decisions.
In considering the relationships between price and quantity demanded, ceteris paribus directs the economist to assume that:
A. price increases affect quantity. B. quantity increases affect prices. C. neither price nor quantity affect demand. D. all other variables remain unchanged.