The Security Market Line (SML) is upward-sloping, indicating that the:
A. Beta of an investment increases as its risk level increases
B. Average expected return on investments decreases as their risk level decreases
C. Average expected return on the risk-free asset increases as its beta increases
D. Average expected return of the market portfolio increases as its beta increases
B. Average expected return on investments decreases as their risk level decreases
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Consumer surplus measures the value between the price consumers are willing to pay and the:
a. producer surplus price. b. deadweight gain price. c. actual price paid. d. preference price.
If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of
a. 5. b. 9. c. 16. d. 24.
A cartoon in the text shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-heart surgeries, and toxic waste cleanups." The cartoon illustrates the
A) Difficulty in measuring social welfare. B) Difference between GDP and national income. C) Problem of measuring the difference in wealth between the United States and other nations. D) Difference between GDP and NDP.
Answer the following questions true (T) or false (F)
1. In absolute value, the tax multiplier is greater than the government purchases multiplier. 2. If government increases taxes by the same amount it increases government spending, there will be no effect on aggregate demand: the increase in government spending is offset by an equal decrease in consumption spending by households. 3. The tax multiplier is calculated as "one minus the government purchases multiplier."