If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:
A. 2.
B. 3.33.
C. 5.
D. 10.
A. 2.
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When the total external and internal costs of a transaction are taken into consideration, this is known as
A) public costs. B) average total costs. C) social costs. D) marginal costs.
Economic efficiency means
A) the same as technical efficiency. B) that all firms within a single competitive industry are producing at the same level of output. C) that it is impossible to increase the output of any good without lowering the total value of the output of the economy. D) that high-tech methods of production are the most efficient.
Which of the following statements about taxation is incorrect?
a. A tax cut affects aggregate demand indirectly. b. A tax cut raises income and expenditures. c. Cutting taxes by $20 is not the same as increasing government spending by $20. d. A change in taxes does not affect consumption. e. An increase in taxes decreases income and expenditures.
Many economists believe that savings accounts should be added to M1 because they
a. are larger in size than conventional checking accounts. b. pay larger interest than checking accounts. c. can be transferred quickly into checkable accounts. d. are also insured by the federal government.