When a U.S. firm sells a good abroad for, say, 100 euros (assume $1.5=1euro), U.S. net exports increase by $150. These $150 in exports can be accounted for as $150 increase in capital outflow because ________
A) private consumption in the foreign country increases by $150
B) if the U.S. firm uses the 100 euros to buy a share of stock in a foreign firm, the firm is supplying U.S. capital to that foreign firm
C) if the U.S. firm uses the proceeds to buy a U.S. bond, capital investment in the foreign country has increased
D) all of the above
E) none of the above
B
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The Ricardian equivalence theorem states that
A) spending on national defense is a direct expenditure offset. B) an increase in government spending by the federal government leads to offsetting reductions in state government spending. C) government spending financed by taxes is equivalent to government spending financed by borrowing. D) an increase in government spending financed by higher taxes has no effect on aggregate demand.
Which of the following statements is false?
A. Externalities can sometimes be internalized through individual voluntary agreements. B. It would be a relatively easy matter to establish property rights in the air. C. Persuasion can be used in some cases to internalize externalities. D. Taxes and subsidies are sometimes used as corrective devices for market failures.
Check collection and clearing happen
A) at the bank where the check was written. B) only at private clearing centers. C) at the Fed and at private clearing centers. D) only at the Fed.
When natural monopoly is present in an industry, the per-unit costs of production will be
a. lowest when there are a large number of producers in the industry. b. lowest when a single firm generates the entire output of the industry. c. lower for small firms than for large firms. d. minimized at the output that maximizes the industry's profitability.