Summarize the effects of a subsidy on the market price and the quantity produced
What will be an ideal response?
A subsidy increases the price received by sellers, shifts the supply curve rightward, and places a wedge between the marginal social benefit and marginal social cost of producing the good. The subsidy creates a deadweight loss, a higher equilibrium quantity sold, over-production, and a lower price paid by the consumers. The subsidy increases farm revenues to all farmers.
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Which of the following is not a component of aggregate expenditure?
A) government spending B) actual investment spending C) planned investment spending D) consumption spending
Everything else held constant, an increase in marginal tax rates would likely have the effect of ________ the demand for municipal bonds, and ________ the demand for U.S. government bonds
A) increasing; increasing B) increasing; decreasing C) decreasing; increasing D) decreasing; decreasing
If a fear of increased bankruptcies of firms causes banks to increase their reserve to deposit ratio, then
a. the money supply and money multiplier will rise. b. the monetary base and the money multiplier will fall. c. there will be no change in the money multiplier, but the money supply will fall. d. the money multiplier and the money supply will fall.
Residential construction (new houses and apartments) are included in which component of GDP?
a. government purchases b. retail spending c. investment spending d. net exports