In which of the following situations would GDP not change?
A. Domestic consumers begin to buy less imported wine, and instead spend just as much money on domestically produced wine.
B. More and more domestic consumers opt to build a new home, rather than spending the same money on an already existing home.
C. Without reducing the number of automobiles sold, domestic automobile producers decide to reduce the number of automobiles they produce, rather than producing cars that would end up as unsold inventory.
D. As domestic consumers buy fewer tobacco products, tobacco manufacturers instead sell their products, at the same price, to foreign buyers.
Answer: D
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Which of the following is not a characteristic of a public good?
a. It is scarce. b. It is not diminished in amount as additional people consume the product. c. Its benefits cannot be withheld from anyone. d. It is free. e. It yields widespread benefits.
When a commercial bank lends $1000 to a customer, and the loan proceeds are spent by the customer, the legal reserves of the banking system
A) decline by $1000. B) do not change unless the loan proceeds are withdrawn in currency. C) rise by $1000. D) rise by more than $1000 because spending increases nominal GDP.
In the long run, one-time increases or decreases in the nominal money supply affect
A) real output, but not the price level. B) the price level, but not real output. C) both real output and the price level. D) neither real output nor the price level.
The authors note that an appropriate discount rate for most U.S. households is near 5%. However, suppose you are considering the decision to attend graduate school, and you already have large credit card balances from your undergraduate years
If you decide to use a higher discount rate (e.g., 10%) to reflect your higher opportunity cost of money, what impact does this change in the discount rate have on the net present value of a graduate degree? A) Increases NPV B) Decreases NPV C) NPV would not change as long as we use nominal costs and returns. D) NPV may increase or decrease, and we cannot determine the direction of change without more information.