A leakage is
A. A decline in the capacity of the economy to produce goods.
B. A decrease in aggregate supply.
C. Income not spent directly on domestic output but instead diverted from the circular flow.
D. An export from the economy.
Answer: C
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If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in government spending causes a _____ change in the price level and a _____ change in output.
a) big; big b) big; small c) small; big d) small; small
The graph shown demonstrates a tax on sellers. Which of the following can be said about the effect of this tax?
A. The price paid by buyers is greater than that received by sellers, and the difference is the total tax revenue. B. The price paid by buyers is greater than that received by sellers, and the difference is the tax wedge. C. The price paid by buyers and received by sellers is higher than it was before the tax was imposed. D. The price paid by buyers is less than that received by sellers, and the difference is the total tax revenue.
Regardless of income level, when the ratio of taxes paid to income is constant then it is called
A. lump sum tax. B. marginal tax. C. progressive tax. D. proportional tax.
Whenever a price ceiling is imposed in a market,
a. quantity demanded exceeds quantity supplied and a surplus results b. quantity demanded exceeds quantity supplied and a shortage results. c. quantity supplied exceeds quantity demanded and a surplus results. d. it is necessary to know whether the ceiling is imposed above or below the equilibrium price in order to determine whether the quantity traded will be affected.