Firms often seek to borrow money to expand their capital stock, and the price they pay for the money is the interest rate. What happens to supply of money if the interest rate increases?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-economic theory has no answer to this question.
c
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are
A) nonmonetary opportunity costs. B) sunk costs. C) implicit costs. D) capital costs.
According to the textbook, the best possible solution to the problem of poverty is:
A. the complete elimination of all efforts to assist the poor. B. a negative income tax with the tax credit equal to the poverty threshold. C. to maintain the current system. D. a combination of a negative income tax and public employment.
In order to internalize the externality due to pollution, the government should impose a tax based on
A) the economic damage associated with the pollution. B) the physical amount of pollution. C) the size of the firm causing the pollution. D) the value of the pollution-causing business activity.