Increases in the budget deficit are believed to cause reductions in investment. Based on your understanding of the IS-LM model, will a fiscal policy action that causes a reduction in the budget deficit cause an increase in investment? Explain
What will be an ideal response?
A policy that causes a reduction in the budget deficit will have an ambiguous effect on investment. Output will fall which will tend to depress I. However, the interest rate will also fall which will tend to increase I. I could increase, decrease, or remain unchanged.
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If the price level increases,
A) the buying power of your checking accounts rises with it. B) the economy tends to grow faster. C) there is no effect on buying power. D) the buying power of your checking account falls.
Jane produces only corn and cloth. Taking account of her preferences for corn and cloth
A) makes her production possibilities frontier straighter. B) makes her production possibilities frontier steeper. C) makes her production possibilities frontier flatter. D) does not affect her production possibilities frontier.
Briefly describe the business practice of tying
Offering goods that are similar to competitors' products but more attractive in some ways is called:
A. product distinction. B. price-point pinning. C. product differentiation. D. deceptive advertising.