What is cost-benefit analysis? Describe the process of cost-benefit analysis
What will be an ideal response?
Cost-benefit analysis is an attempt to compare the costs and benefits of a program. Typically, this will be undertaken when a program is in the planning stages to see whether the program should go forward. The first step in cost benefit analysis is enumerating the options available. For some goals, only one option might be feasible but for others multiple options might be feasible, with one more cost-effective than the others. The second step is to enumerate the costs and benefits of each option. This involves enumerating all of the primary and significant secondary effects, making sure not to double count any costs or benefits. The third step is converting the costs and benefits to dollar terms. Finally, if benefits or costs occur in future periods, they need to be discounted to the current period.
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Another term for negative externalities is
A) bad vibrations. B) non-marginal costs. C) spillover costs. D) sunk costs. E) surplus product.
Over the last decade, U.S. investment is higher than it otherwise would have been because of ___________.
Fill in the blank(s) with the appropriate word(s).
Suppose the Chinese central bank wants to keep the exchange rate of its currency value constant over time. An increase in the demand for Chinese goods by American residents will lead the Chinese central bank to
A) coordinate with the U.S. central bank in order to increase the supply of the U.S. dollar in the foreign exchange market. B) increase the demand for the Chinese currency in the foreign exchange market. C) use its dollar reserves to buy the Chinese currency in the foreign exchange market. D) sell the Chinese currency in exchange for U.S. dollars in the foreign exchange market.
If a strong, persistent trend in the exchange rate appears to be inconsistent with any form of economic fundamentals, it is called
A. a speculative bubble. B. overshooting. C. uncovered speculation. D. exchange rate parity.