Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. Suppose Leo earns $10. He will lose ________ from each benefit, for a total loss of ________.
A. $.75; $1.00
B. $7.50; $15.00
C. $7.50; $7.50
D. $.75; $1.50
Answer: B
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Economic growth will tend to be higher in a country that
a. has a low savings rate. b. has an open economy that encourages the rapid spread of technology. c. has an undeveloped system of property rights. d. does not grant patents to investors.
If the marginal propensity to consume (MPC) is 0.96, the value of the spending multiplier is:
a. 25. b. 40. c. 96. d. 100.
A "lean against the wind" policy says the government should not use stabilization policy and simply let the economy "weather the storm."
a. True b. False Indicate whether the statement is true or false
The table below shows the aggregate demand and aggregate supply schedules for a hypothetical economy.
Refer to the table above. At the price level of 150, there will be a general:
A. Surplus in the economy, and output supplied will decrease as the price level falls
B. Shortage in the economy, and output demanded will decrease as the price level rises
C. Surplus in the economy, and output supplied will increase as the price level rises
D. Shortage in the economy, and output demanded will increase as the price level falls