Assume Congress enacts a $500 billion increase in spending and a $500 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a:
A. $500 billion decrease in aggregate demand.
B. $500 billion increase in aggregate demand.
C. $1,000 billion increase in aggregate demand.
D. $1,000 billion decrease in aggregate demand.
Answer: B
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When economists say wages are "sticky," they mean that they:
A. are slow to adjust to changes in the economy, and can cause unemployment. B. stick to current market trends, and adjust to equilibrium when changes in the economy occur. C. get stuck behind current market trends, and follow a typical two-week lag with changes in the economy. D. lead market trends, and other variables will stick to the wage rate and follow it closely.
When would a rise in labor's marginal productivity lead to a leftward shift in workers' labor supply curve?
a. When workers are employed by a monopsony. b. When workers earn more nonlabor income from their capital. c. When workers engage in intertemporal substitution. d. When workers reduce their investment in human capital.
The rate of return that financial investors require to hold a risky asset minus the rate of return on a safe asset is called the:
A. risk premium. B. real interest rate. C. nominal interest rate. D. discount rate.
The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp: A. has lower implicit costs, including a normal profit, than its explicit costs. B. is earning a normal profit but not an economic profit. C. is earning an economic profit. D. is suffering an economic loss, when implicit costs are considered.