Assume that the marginal propensity to consume out of disposable income is 0.8 and that the government taxes all income at a constant rate of 30%. If the gross income increases by $100, consumption will initially increase by
A) $44
B) $56
C) $70
D) $80
E) $100
Answer: B) $56
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If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
A) government purchases. B) oil prices. C) the money supply and a decrease in interest rates. D) taxes.
Value added is equal to the value of a firm's production minus
A) all of its costs of production. B) labor costs. C) investment expenditures. D) intermediate goods used in production.
Division of labor means that
A) the labor market in the United States is geographically segmented. B) some employees join labor unions and others do not. C) management and labor are always in conflict. D) the production process is divided into smaller tasks.
Refer to Figure 1A.2. If this consumer rents zero DVDs, how many movie tickets will she purchase?
A. 0 B. 5 C. 10 D. 15