A subsidy is sometimes used by the government to correct the problems associated with
A. negative externalities.
B. positive externalities.
C. monopolies.
D. public goods.
Answer: B
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If the rate of exchange for a pound is $4, the rate of exchange for the dollar is ________.
A. $0.25 B. 4 pounds C. 1/4 pound D. $1.00
Which of the following is not included when using the expenditure approach to compute GDP?
a. Consumer spending on goods and services b. Net exports c. Government purchases d. Private investment e. Transfer payments
Duesenberry's relative income hypothesis is based on the belief that consumption spending
a. depends on current income b. is rooted in status c. is based on transitory income d. depends on permanent income e. is based on absolute income
Which of the following most clearly states the "paradox of thrift"?
a. If households simultaneously attempt to increase their savings, the result may be a reduction in demand, output, and total savings. b. A strong, healthy economy can be achieved if most households are heavily in debt. c. A high savings rate will provide the funds for investment, which is a driving force of long-term economic growth. d. A reduction in savings and an increase in consumption will expand output and employment.