Use the following graph to answer the next question.
Which of the following changes will shift AD1 to AD2?
A. A shrinkage in the value of stocks and other financial assets
B. An increase in the value of the dollar relative to other currencies
C. An increase in real interest rates
D. A decrease in personal and business taxes
Answer: D
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To obtain GDP from a national income base,
a. add indirect business taxes and Social Security taxes b. add capital depreciation and Social Security taxes c. add indirect business taxes and personal taxes d. subtract indirect business taxes and capital depreciation e. add indirect business taxes and capital depreciation
An efficient tax system is one that (i) maximizes tax revenues. (ii) minimizes deadweight losses from taxes. (iii) minimizes administrative burdens from taxes. (iv) promotes equity across taxpayers
a. (i) only b. (ii) and (iii) only c. (i), (ii), and (iii) only d. (i), (ii), (iii), and (iv)
For any constant returns production function, the isoquants for Q = 1, Q = 2, Q = 3, etc. will
A. be equally spaced, in that the distance between Q = 1 and Q = 2 is the same as Q = 2 and Q = 3, etc. B. all be inversely proportional to the inputs. C. be straight lines. D. exhibit diminishing returns in the long run.
After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1.5. In the short run, the absolute price elasticity of demand for the item was probably
A) less than 0. B) greater than 0. C) less than 1.5. D) greater than 1.5.