If the MPC equals 0.75, a $100 billion transfer payment decrease will decrease consumption in the first round by
A. $400 billion.
B. $75 billion.
C. $100 billion.
D. $25 billion.
Answer: B
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Today, the United States charges an average tariff rate of less than 1.5 percent
Indicate whether the statement is true or false
Collusion between two firms occurs when
A) announce that each will match its rival's market price. B) firms explicitly or implicitly agree to adopt a uniform business strategy. C) the firms independently pursue strategies that could hurt each other. D) firms act altruistically to bring about the economically efficient outcome.
In the monetary small open-economy model, a fixed exchange rate insulates the domestic price level from
A) both real and nominal shocks from abroad. B) real shocks from abroad, but not nominal shocks from abroad. C) nominal shocks from abroad, but not from real shocks from abroad. D) neither real nor nominal shocks from abroad.
You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in
your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?