A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7 . Assume that the economy is initially in equilibrium. What is the spending multiplier of this economy?
a. 2
b. 1.4
c. 0.7
d. 0.9
e. Cannot be determined with the given information
a
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The table above shows a production possibilities frontier for an economy. If the economy tried to produce a combination of 250 loaves of bread and 800 books,
A) there is some unemployment. B) it cannot produce this combination because it lacks enough resources or technology. C) it is enjoying a free lunch. D) the tradeoff between bread and books is inefficient. E) there is full employment.
Governments can increase the consumption of a product that helps in reducing negative externalities by
A) subsidizing the purchase of the product. B) taxing the consumption of the product. C) assigning property rights to the producer of the product. D) taxing the production of the product.
A perfectly competitive industry must have a perfectly elastic long-run supply curve
a. True b. False Indicate whether the statement is true or false
Microeconomics only looks at the behavior of one consumer or one firm in a market, while macroeconomics looks at the behavior of an entire industry or group of consumers
Indicate whether the statement is true or false