Keynesian theory became important when classical economic theory did not adequately explain:
A. A prolonged period of both inflation and unemployment.
B. A prolonged growth recession.
C. A depression.
D. A prolonged period of inflation.
E. Outsourcing.
Ans: C. A depression.
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Suppose an agent must pay the full marginal cost for an item but splits the marginal revenue with the principal. As a result,
A) joint profit is maximized. B) joint profit is not maximized. C) the agent will not enter into such a contract. D) the agent wishes to sell as many items as he can.
The first term in an NPV calculation is usually
A) positive, because firms consider only positive returns. B) positive, because interest charges do not accrue until the second period. C) zero, because interest charges do not accrue until the second period. D) negative, because funds for the project have to be borrowed up front before it is begun. E) negative, because the cost of the project is immediate, but revenue streams from the project come later.
The government’s fiscal policy is its plan to influence aggregate demand by changing
A. the money supply. B. minimum wage levels. C. sales taxes. D. taxation and spending.
Buyers of a good will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the good
b. tax is placed on the buyers of the good. c. supply of the product is more elastic than the demand for the good. d. demand for the product is more elastic than the supply of the good.