If the government wishes to encourage firms to internalize externalities, they should ________ activities resulting in negative externalities and ________ activities resulting in positive externalities
A. place an injunction against; tax
B. tax; subsidize
C. subsidize; tax
D. ban; generate
Answer: B
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A disadvantage of functional finance is that it: a. does not focus on producing the potential level of output in an economy
b. increases the level of unemployment during recessions. c. allows chronic deficits that magnify into national debt, allowing it to reach an alarming level. d. requires that the budget is balanced even during times of war. e. magnifies fluctuations in the business cycle.
Which of the following would cause a rightward shift in the labor demand curve?
a. A rise in the demand for leisure hours. b. A rise in the wage rate. c. A rise in workers' marginal productivity. d. A decline in workers' nonlabor incomes.
The marginal propensity to consume is defined as the
a. fraction of total income not spent on consumption. b. proportion of any change in income that is spent on consumption. c. fraction of total income spent on consumption. d. fraction of a change in income that is saved.
If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?
a. desired saving and desired investment both fall b. desired saving and desired investment both rise c. desired saving falls and desired investment rises d. desired saving rises and desired investment falls