If raising taxes or borrowing are your only two choices of financing current expenditures, which would you choose, and why, if you were in charge of setting policy?
What will be an ideal response?
Both systems have drawbacks. Increasing taxes might limit economic growth by reducing
consumer spending. Borrowing could cause crowding out by the private sector. The question
can be answered by examining which system will create the most economic good, while
causing the least amount of economic harm. A third alternative is to reduce current
expenditures so that there is no need for deficit financing. This view is normally not very
politically popular.
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Why are firms in monopolistic competition unable to earn an economic profit in the long run?
What will be an ideal response?
According to the figure shown:
This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive. A. there is no stable equilibrium to the game. B. both will act in their own self-interest and get a stable, but less than optimum, equilibrium. C. both will act in their own self-interest and get an optimum equilibrium that is stable. D. both have incentive to put forth high effort.
On January 25, 2009, one U.S. dollar traded on the foreign exchange market for about 0.75 euros. Therefore, one euro would have purchased about ________ U.S. dollars
A) 0.75
B) 1.00
C) 1.33
D) 1.75
Let the demand function for a product be Q = 100 ? 2P. The inverse demand function of this demand function is:
A. P = 50 ? 0.5Q. B. P = 50 + 0.5Q. C. Q = 100 + 2P. D. None of the answers is correct.