Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it. If the cost of paving the driveway is $2,000, then it is ________ for the driveway to be paved because total economic surplus would ________.
A. efficient; increase by $400
B. inefficient; fall by $1,100
C. efficient; increase by $1,100
D. inefficient; fall by $500
Answer: A
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Based on the following information, what is the balance on the current account?
Exports of goods and services = $5 billion Imports of goods and services= $3 billion Net income on investments = -$2 billion Net transfers = -$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S. holdings of assets in foreign countries = -$1 billion A) -$2 billion B) $1 billion C) $3 billion D) $4 billion
The term "depreciation" in the national income accounts refers to
a. the adjustment of GDP for inflation. b. plant and equipment "used up" in producing current output. c. citizenship differences among income recipients. d. government transfer payments minus tax revenues.
A move from E to F represents
A. an increase in quantity demanded.
B. a decrease in quantity demanded.
C. an increase in demand.
D. a decrease in demand.
An economist who claims that an increase in government spending would result mainly in a higher price level believes the economy is operating where the
A. MPC is small. B. MPC is large. C. aggregate supply curve is flat. D. aggregate supply curve is steep.