The U.S. and Japan have significant trade with each other. Which of the following is true?
A. U.S. prices increase ? U.S. exports increase ? Japanese prices decrease.
B. U.S. prices decrease ? U.S. exports decrease ? Japanese prices increase.
C. U.S. prices decrease ? U.S. imports increase ? Japanese prices increase.
D. U.S. prices increase ? U.S. imports increase ? Japanese prices increase.
Answer: D
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In a liquidity trap, monetary policy has ________ effect on aggregate spending because a change in the money supply has ________ effect on interest rates
A) no; no B) no; a large C) no; a small D) a large; a large
Mathematically, the value of the spending multiplier in terms of the marginal propensity to consume (MPC) is given by the formula:
a. MPC ? 1. b. (MPC ?1) / MPC. c. 1 / MPC. d. 1 / (1 ? MPC).
If the producers of canned green beans expect the price of canned green beans to increase in the future due to an increase in demand, they may put some of their current production into storage and supply less in the market today
a. True b. False Indicate whether the statement is true or false
Two firms, A and B, each currently dump 20 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm 10 pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each ton of pollution that it
eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, we would expect that a. Firm A will no longer pollute, and Firm B will not reduce its pollution at all. b. Firm B will no longer pollute, and Firm A will not reduce its pollution at all. c. Firm A will dump 10 tons of pollution into the river, and Firm B will dump 10 tons of pollution into the river. d. Firm A will increase its pollution and Firm B will reduce its pollution.