A positive externality or spillover benefit (additional social benefit) occurs when
A. the benefits associated with a product exceed those that accrue for consumers.
B. firms earn positive economic profits.
C. a firm does not bear all of the costs of producing a good or service.
D. product differentiation increases the variety of products available to consumers.
Answer: A
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If potential GDP for the third quarter of 2012 = $20.4 billion, and the deviation from potential GDP for the third quarter of 2012 = -$1.6 billion, then the output gap was
A) -7.8%. B) -12.8%. C) -18.8%. D) -32.6%.
Two players who are both playing tit-for-tat can quickly find their way toward:
A. lasting cooperation. B. noncooperative outcomes for the remaining rounds. C. a cycle of cooperation and noncooperation, similar to a business cycle. D. None of these statements is true.
Which of the following is not an interest-earning asset of commercial banks?
a. Required reserves. b. Securities. c. Loans. d. All of these are interest-earning assets of commercial banks.
At the beginning of year one, there is no government debt outstanding. The government runs a $100 billion deficit in year one. Interest at a nominal rate of 10% must be paid starting in year two. Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%. Assume the government balances its primary budget in the future and the interest rate and growth rate do not change.(a)What will be the government deficit in years two, three, four, and five?(b)What will be the value of government bonds outstanding at the end of the fifth year?(c)What will be the debt-GDP ratio at the end of year five?
What will be an ideal response?