The government is seen by many economists to be the agency that best resolves the problem of negative externalities because it
a. can create positive externalities that compensate for the negative ones
b. has access to more information than any private firm or individual and can act more objectively than any private firm or individual
c. is the only one affected by negative externalities
d. gains the most from negative externalities
e. has the power to distribute the bonuses resulting from negative externalities
B
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In the market for reserves, a lower interest rate paid on excess reserves
A) decreases the supply of reserves. B) increases the supply of reserves. C) decreases the effective floor for the federal funds rate. D) increases the effective floor for the federal funds rate.
Actual insurance premiums charged by insurance companies may exceed the actuarially fair rates because:
A) the insurance companies have monopoly rights issued by state regulators. B) the insurance companies are risk averse. C) there are administrative costs and other expenses that must be covered by the premia. D) insurance companies tend to over-state the risks they face.
Answer the following statements true (T) or false (F)
1) The greater the MPC, the greater the multiplier. 2) The multiplier is equal to the reciprocal of the MPC. 3) The multiplier shows the relationship between changes in a component of spending, say, investment, and the consequent changes in real income and output. 4) Economists widely agree that the value of the real-world multiplier is 2.5. 5) If the MPC is .9 and investment spending increases by $20 billion, real GDP will increase by $200 billion.
Saying a firm will continue investing up to the point at which ________ is equivalent to saying that a firm will keep investing in new capital up to the point where the expected rate of return is equal to the interest rate.
A. the return on capital is equal to depreciation B. the marginal revenue product of capital is equal to its rental cost C. the interest rate is equal to the inflation rate D. the marginal product of capital is equal to the marginal product of labor