The closer the economy is to capacity, the greater the risk that fiscal or monetary stimulus will cause
A. An increase in the price level and no change in output.
B. No change in the price level and no change in output.
C. Only an increase in output.
D. A decrease in the price level and no change in output.
Answer: A
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Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?
A) if the total revenue exceeds the total fixed cost B) if the total revenue exceeds the total variable cost C) if the total revenue is positive D) if the total revenue is increasing E) if the marginal revenue exceeds the price.
Entrepreneurs are important to market economies because
A) they engage in risk taking and innovation. B) they make up a large portion of low-skilled labor. C) they take few risks and thereby, suffer fewer bankruptcies. D) they represent the bulk of employment at large corporations.
The government reduces the corporate profits tax. As a result, corporate profits increase. This will
A. increase the nonlabor income of households, causing consumption to increase and labor supply to increase. B. increase the nonlabor income of households, causing consumption to increase and labor supply to decrease. C. increase the nonlabor income of households, causing consumption to increase and labor supply to increase or decrease depending on the relative magnitude of the income and substitution effects. D. have no effect on households.
A rational criminal model assumes
A. criminals will commit more crimes if the severity of punishment rises. B. smart people commit crime. C. criminals will commit more crimes if the likelihood of getting caught rises. D. criminals commit crimes because they have few legal opportunities.