Using Figure 2 below, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE1 might be:
A. wealth level increases.
B. interest rates increase.
C. taxes decrease.
D. domestic income decreases.
B. interest rates increase.
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Answer the next question on the basis of the following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest rate = 10%. If the price of this bond falls by $200, the interest rate will
A. fall by 2.5 percentage points. B. fall by 5 percentage points. C. rise by 5 percentage points. D. rise by 2.5 percentage points.
In recent years, redistribution has been the fastest growing category of federal government outlays
a. True b. False
The government sets up a lighthouse to prevent ships from crashing into rocks near the shore. The lighthouse is an example of a _____
a. merit good b. club good c. public good d. private good
When prices rise, which of the following happens to income?
a) It goes down b) It buys less c) It rises to meet prices d) It is used to buy different things