Which of the following is the government most likely to discourage because of the existence of externalities?
A. Foods that taste good.
B. Thermal pollution from a power plant that improves fishing downstream.
C. Cars that create an excessive amount of exhaust fumes.
D. All goods and services produced by monopolies.
Answer: C
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Which of the following will not shift the demand curve for natural gas?
A.) A change in consumer income. B.) A change in consumer expectations. C.) A change in the weather and heating requirements. D.) A change in the technology used to produce natural gas.
Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:
A. 500 yen. B. 5,000 yen. C. 10,000 yen. D. 50,000 yen.
The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at Point A, a triple intersection. Here, the FE curve is flatter than the LM curve.
To defend the fixed exchange rate, at Point B the country's monetary authority must
A. sell domestic currency. B. buy domestic currency. C. sell foreign government bonds. D. buy domestic government bonds.
GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:
A. intermediate goods. B. the underground economy. C. public transfer payments to households. D. the consumption of fixed capital.