In an open economy, the government purchases multiplier will be larger the
A) larger the marginal propensity to consume. B) smaller the marginal propensity to import.
C) smaller the marginal income tax rate. D) All of the above are correct.
D
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Which of the following is NOT a capital good?
A. A new house purchased by a family B. A new apartment building purchased by a corporation C. Machines purchased by a car manufacturer to measure metal thicknesses D. Batteries purchased by a car manufacturer to install in new cars
For a bank, the ration of after-tax profit to assets is its:
A) net interest margin. B) return on assets. C) return on equity. D) spread.
An increase in the supply of a good will cause
a. a decrease in equilibrium price and an increase in equilibrium quantity. b. an increase in equilibrium price and quantity. c. an increase in equilibrium price and a decrease in equilibrium quantity. d. a decrease in equilibrium price and quantity.
Suppose the government of a small country has to frame a policy which would promote the level of domestic production of an import-competing industry, because domestic production is believed to create extra benefits for the country. The government believes that it has a choice of either imposing a tariff on the foreign goods or providing production subsidies to the domestic firms. Which policy should the government choose and why? Explain with a diagram. Is there a particular principle that can guide the government's decision? If so, name it and state it.
What will be an ideal response?