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
Answer: b) big; small
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Asarta Inc. is polluting into the nearby aquifer and the citizens of Buttersville demand that this be cleaned up. If the benefit to cleaning up the aquifer is estimated to be about $125,000 and the cost is estimated at $130,000, will the aquifer get cleaned?
A. Uncertain, with the information given. B. No, because the costs outweigh the benefits. C. Yes, because the benefits outweigh the costs. D. Yes, because the benefit is high.
A high marginal propensity to consume implies which of the following?
A) A small change in consumption when income changes B) A high savings rate C) A high marginal tax rate D) An equilibrium level of income near full employment E) A low marginal propensity to save
To be independent, a central bank must have:
A. control of its own budget. B. the chairperson serve as a member of the President's cabinet. C. the board members appointed for very short terms. D. its policies overturned only by the president.
Explain why a lowering of interest rates should raise stock prices.
What will be an ideal response?