The major lesson of the circular flow diagram is that
A. total income in the economy must always equal total spending.
B. taxes must always be greater than government expenditures.
C. tax receipts must be equal to transfer payments
D. saving must always be less than investment.
Answer: A
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Generally with bond ratings, the ________ the rating, the higher the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default
A) lower; higher B) higher; higher C) higher; lower D) lower; lower
If High Tech, a computer manufacturer, has a contract with Big Chips, a computer chip manufacturer, to produce the computer chips needed for High Tech's computers, this is an example of ________.
A) forward integration B) outsourcing C) divestiture D) backward integration
The marginal rate of technical substitution (RTS) of labor for capital measures:
a. the amount by which capital input can be reduced while holding quantity produced constant when one more unit of labor is used. b. the amount by which labor input can be reduced while holding quantity produced constant when one more unit of capital is used. c. the ratio of total labor to total capital. d. the ratio of total capital to total labor.
Crowding out refers to the situation in which:
a. borrowing by the federal government raises interest rates and causes firms to invest less. b. foreigners sell their bonds and purchase U.S. goods and services. c. borrowing by the federal government causes state and local governments to lower their taxes. d. increased federal taxes to balance the budget causes interest rates to increase and consumer credit decreases.