If the government uses a budget surplus to pay off old debt, private sector spending may increase.
Answer the following statement true (T) or false (F)
True
a surplus is used to pay off some of the debt, a crowding-in effect may occur. Households that were holding that debt (government bonds) will end up with more money. If they use that money to buy goods and services, then private sector output will expand.
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Figure 14.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes in the market are lemons (low quality), what fraction of used bikes sold will actually be lemons (low quality)?
A. 8/30 B. 22/30 C. 8/22 D. 30/30
Under which of the following circumstances would we observe the greatest increase in real income?
A. Nominal income falls by 2 percent and the price level falls by 10 percent. B. Nominal income rises by 8 percent and the price level rises by 4 percent. C. Nominal income rises by 12 percent and the price level rises by 15 percent. D. Nominal income falls by 4 percent and the price level rises by 6 percent.
Refer to Figure 2-5. If the economy is currently producing at point W, what is the opportunity cost of moving to point Y?
A) 2 million tons of paper B) 2 million tons of steel C) 14 million tons of steel D) 9 million tons of paper
When the production of a good involves several inputs, an increase in the cost of one input will usually cause total costs to
A) rise more than in proportion. B) rise less than in proportion. C) remain unchanged. D) rise by the exact amount of the input price increase.