If taxes are a function of income, then the AE function is
A. downward sloping.
B. steeper than if taxes are a lump-sum amount.
C. vertical.
D. flatter than if taxes are a lump-sum amount.
Answer: D
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If the yield curve has a mild upward slope, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting
A) a rise in short-term interest rates in the near future and a decline further out in the future. B) constant short-term interest rates in the near future and further out in the future. C) a decline in short-term interest rates in the near future and a rise further out in the future. D) a decline in short-term interest rates in the near future and an even steeper decline further out in the future.
An increase in foreign investment in Brazil's mining industry will increase the capital stock in Brazil. All else equal, as the capital stock increases, the marginal product of capital (MPK) will
A) increase due to diminishing marginal returns. B) decrease due to diminishing marginal returns. C) increase since capital is not subject to diminishing marginal returns. D) decrease since capital is not subject to diminishing marginal returns.
As the marginal propensity to consume (MPC) increases, the spending multiplier
a. increases. b. decreases. c. remains constant. d. becomes indefinable.
B. excluded when calculating GDP because they do not reflect current production
A. added to exports when calculating GDP because imports reflect spending by Americans. B. subtracted from exports when calculating GDP because imports do not constitute spending by Americans. C. subtracted from exports when calculating GDP because imports do not constitute production in the United States. D. added when calculating GDP because imports do not constitute production in the United States.