Suppose equilibrium national income is currently at $800 billion and intended investment is $100 billion. If an increase in the interest rate reduces intended investment from $100 billion to $75 billion, and the MPC is 0.8, the new level of equilibrium national income will be
a. $500 billion
b. $600 billion
c. $675 billion
d. $775 billion
e. $800 billion
C
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The action time lag is the time period that elapses
A. between when an economic problem manifests itself and it is officially acknowledged. B. between the recognition of an economic problem and implementing policies to solve it. C. between implementing policies to solve an economic problem and when the results of that policy can be measured. D. between the beginning of the budgetary process and the final budget resolution.
The level of consumption _____ as the stock of liquid assets in the hands of consumer rises and it ____ as the level of disposable income rises.
A. rises; rises
B. falls; falls
C. rises; falls
D. falls; rises
Reducing prices below cost in order to eliminate competitors (with the intention of later raising prices to recoup all losses) is
A) an empirical impossibility in a free society. B) called induced competition. C) called predatory price cutting. D) increasingly common in the American economy.
"Diseconomies of scale" occur in
A) the long run, but not the short run. B) the short run, but not the long run. C) both the short run and the long run. D) neither the short run nor the long run.