As a result of people's habit formation, a tax cut that aims at increasing desired real consumption spending will
A. have no effect on aggregate demand.
B. have long-lasting effects on aggregate demand.
C. affect only inflation but not unemployment.
D. decrease aggregate demand by the same amount of the change in real consumption spending.
Answer: B
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Suppose purchasing power parity holds. If in 1997 the price level in the United States is 100, the price level in Japan is 10,000, and the nominal exchange rate is 100 yen per dollar, while in 1998 the price level in Japan rises to 10,500 and the
nominal exchange rate rises to 105, then the price level in the United States in 1998 must be A) 95. B) 100. C) 105. D) 110.25.
The term "bottleneck" refers to
a. when increasing amounts of variable inputs must share a fixed input. b. "fixity" of some factor of production c. None of the above d. Both a and b
The socially optimal amount of pollution abatement occurs where society's marginal:
A. benefit of abatement exceeds its marginal cost of abatement by the greatest amount.
B. benefit of abatement equals its marginal cost of abatement.
C. benefit of abatement is zero.
D. cost of abatement is at its maximum.
In which of the following product markets are we likely to observe the largest amount of advertising?
a. markets with highly differentiated products b. perfectly competitive markets c. markets in which industrial products are sold d. markets in which there is very little difference between different firms' products