The most complete definition of an economic system includes
(a) incentives, opportunity costs and markets.
(b) resource allocation arrangements, property rights and incentives.
(c) property rights and scarcity.
(d) the laws of supply and demand, the principle of substitution and self-interest.
(e) choice and the law of diminishing returns.
Answer: (b) resource allocation arrangements, property rights and incentives.
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In the monetarist view
A. inappropriate monetary policy is a major source of macroeconomic instability. B. adverse aggregate supply shocks are a major source of macroeconomic instability. C. changes in investment spending are a major source of macroeconomic instability. D. the fact that prices and wages are flexible is a major source of macroeconomic instability.
Jelena lives in a poor country with very little capital. In contrast, Alejandro’s country is rich and has a lot of capital. The law of diminishing marginal returns to capital means that, to boost economic growth by 1 percentage point in both countries, ______.
a. Jelena’s country will need to add many more units of capital than Alejandro’s will need to b. both countries will need to add the same amount of capital c. Alejandro’s country will need to add many more units of capital than Jelena’s will need to d. Alejandro’s country will need to invest a significant amount of capital in Jelena’s country
Citizens and investors in Argentina interpreted the government's fiscal stimulus response to the country's financial crisis as:
A. a bad sign and drastically increased their spending and investing as a result. B. a bad sign and drastically reduced their spending and investing as a result. C. a good sign and drastically increased their spending and investing as a result. D. a good sign and drastically reduced their spending and investing as a result.
There are ten states in the democratic nation of Katlandia, and each state has ten thousand residents. Although incomes vary, each Katlandian pays a tax equal to the total cost of all government projects divided by the number of residents in the country. Currently, two states each have one army base. An army base adds $2 million to a state's local economy each year. In addition, in terms of increased security, the annual marginal benefit to Katlandia of having an additional army base is shown below. The total cost of an army base is $8 million per year.
It is socially optimal for Katlandia to have:
A. four army bases. B. two army bases. C. three army bases. D. one army base.