In a tax incentive program, the person who conserves the most pays:
A. relatively more tax.
B. relatively less tax.
C. no tax.
D. no penalties.
Answer: B
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How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing?
What will be an ideal response?
A classical IS—LM model of the world economy can be used to show that in a flexible exchange-rate system, a temporary increase in government purchases will cause
A) output and the real interest rate to rise, which reduces net exports but has an ambiguous effect on the real exchange rate. B) output and the real interest rate to rise, which increases net exports but has an ambiguous effect on the real exchange rate. C) output to rise and the real interest rate to fall, which reduces net exports and causes the exchange rate to depreciate. D) the real interest rate to fall, which causes the exchange rate to rise, which reduces net exports.
Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:
a. substitution effect. b. income effect. c. utility effect. d. consumption effect.
If the government wishes to increase GDP by $1,200b, and the MPC is 0.75, it should:
A. increase its spending by $300b. B. decrease its spending by $900b. C. increase its spending by $900b. D. decrease its spending by $300b.