Based on the neoclassical theory of investment, which aspect of a booming economy helps to explain the procyclicality of investment?
A) Tax revenues are likely to be rising.
B) The real interest rate is likely to be rising.
C) Capital goods are becoming more expensive.
D) Financing constraints are likely to be relaxed for many businesses.
D
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The political business cycle involves the ________
A) expenditure of substantial funds by industry lobbyists to manipulate government regulation B) movement of individuals from government employment to positions within the industry they had previously participated in regulating C) use of expansionary fiscal policy just prior to elections D) election of government officials who are supportive of the government sector
Which of the following statements about the optimal solution to the consumer problem based on the Cobb-Douglas utility function is NOT true?
A) The cross-price elasticities of demand are zero. B) Both goods have downward sloping demand curves. C) Both goods are normal goods. D) The marginal utility of income may be negative.
The GDP tends to:
a) overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. b) understate economic welfare because it includes expenditures undertaken to offset or correct pollution. c) understate economic welfare because it does not take into account increases in leisure. d) overstate economic welfare because it does not reflect improvements in product quality.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point B to Point D, the opportunity cost of motorcycles, measured in terms of hybrid cars,
A. increases B. remains constant. C. initially increases, then decreases. D. decreases.