Assume that taxes depend on income. The MPC is 0.8 and t is 0.5. If government purchases increase by $100 billion, the equilibrium level of output will increase by
A. $57.5 billion.
B. $167 billion.
C. $192.31 billion.
D. $215.9 billion.
Answer: B
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(i) How many videos does Spencer rent each year? How much consumer's surplus does Spencer receive from renting videos? (ii) Blockpopper's starts a "frequent viewers" club. For a membership fee of $35 per year, club members can rent as many videos as they wish at the discounted price of $2 per rental. Should Spencer join the "frequent viewers" club? If yes, how much surplus value would Spencer receive as a club member? If no, what membership fee would Spencer be willing to pay to join the club?
(i) The accompanying diagram shows the effects of a tariff. Initially, the price is P0, domestic firms produce Q0 units, and Q1 - Q0 units are imported from foreign firms. When the tariff is imposed, the price increases to P0 + t.
How does the tariff affect consumers' surplus and producers' surplus? How much tariff revenue is collected by the government? Does imposing the tariff cause the country's social gain to rise or fall?
(ii) The situation in part i is known as the "small country" case-the country has no market power, so its tariff does not affect the world price P0. Now consider the "large country" case shown in the accompanying diagram-in this case, the country has market power, and the tariff (by reducing the demand for imports) causes the world price to fall from P0 to P1. So after the tariff is imposed, the domestic price is P1 + t.
How does the tariff affect consumers' surplus and producers' surplus in this situation? How much tariff revenue is collected by the government? When a "large country" imposes a tariff, will its social gain rise or fall?
The speculative demand for money
a. varies inversely with national income b. varies directly with national income c. involves holding money for unexpected problems d. varies directly with the transactions demand for money e. varies inversely with the interest rate
Which of the following would likely be studied by a microeconomist rather than a macroeconomist?
a. the effect of foreign direct investment on economic growth b. the effect of a sales tax on the cigarette industry c. the effect of an investment tax credit on the economy's capital stock d. the effect of a war on government spending
Use the following graph to answer the next question.
Assume the economy is initially located on AD0 and AS0. An increase in resource prices would result in price ________ and real domestic output ________.
A. F; A B. F; C C. G; B D. E; B