The social discount rate is an important component in net present value (NPV) calculations for public policies related to stock externalities, but economists do not agree on which value to use for this rate
Suppose a recent study reports that the NPV of a proposed carbon tax intended to reduce carbon dioxide emissions is positive, but the annual net benefits do not become positive until 2060. The authors of the study used a social discount rate of 2%. What can we say about the findings of the study if the research were repeated with a higher social discount rate? A) NPV would decline, and the annual net benefits would become positive after 2060.
B) NPV would increase, and the annual net benefits would become positive before 2060.
C) NPV would decline, and the annual net benefits would not change.
D) The findings of the study would not change.
A
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Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium
For Year 2, graph aggregate demand, long-run aggregate supply, and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct a contractionary monetary policy. Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.
The fiscal-policy multiplier will be greater
A) the greater is the interest responsiveness of the demand for money. B) the smaller is the interest responsiveness of autonomous expenditures. C) the smaller is the income responsiveness of the demand for money. D) All of the above tend to make the fiscal-policy multiplier greater.
If goods X and Y are substitute goods, then an increase in the price of Y, other things being equal,
A) results in a decrease in the amounts of both X and Y consumed. B) decreases the quantity demanded of Y, but has no effect on the amount of X consumed. C) results in a decrease in the quantity of Y consumed, but increases the demand for X. D) has no real effect on the quantity demanded of good Y, but increases the demand for X.
In the monopolistic competition model
a. firms are price takers b. barriers to entry maintain some monopoly "rents" in the long run. c. one dominant firm acts as the monopolist that is followed by the fringe of competitors. d. none of these.