If autonomous investment increases by $200 million and the marginal propensity to consume (MPC) is 0.75, then
A. real Gross Domestic Product (GDP) will rise by $400 million.
B. real Gross Domestic Product (GDP) will rise by $800 million.
C. real Gross Domestic Product (GDP) will fall by $200 million.
D. real Gross Domestic Product (GDP) will rise by $200 million.
Answer: B
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The combined effect (both income and substitution) of a wage increase is that
A) if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending. B) the income effect always dominates, leading to less work at a higher wage. C) if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward. D) the substitution effect always dominates, leading to more work at a higher wage.
In insurance markets, adverse selection often
A. brings down prices for insurance premiums. B. eliminates exchange possibilities that would be beneficial to both consumers and insurance companies alike. C. creates exchange possibilities that are beneficial to consumers and insurance companies. D. creates an abundance of lawsuits.
When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.
A) efficient central planning B) equity C) productive efficiency D) allocative efficiency
In the chain of cause and effect involving monetary policy:
a. A decrease in the rate of interest will decrease aggregate demand b. An increase in the money supply will decrease the rate of interest c. A decrease in excess reserves will increase the money supply d. A decrease in aggregate demand will increase output