Figure 5-6
In Figure 5-6, a shift in the budget line from AC to AB indicates
A. the price of wine coolers has risen.
B. income has increased.
C. the price of beer has fallen.
D. the price of wine coolers has fallen.
E. All of the responses are correct.
Answer: A
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Bank panics have largely disappeared in the United States because
A) banks are now required to hold a larger fraction of deposits as reserves. B) of low interest rates. C) bank loans are more closely monitored by the Federal Reserve. D) of deposit insurance.
The only factor that can cause movement along the aggregate supply curve is the
a. labor force. b. capital stock. c. availability of resources. d. price level. e. All of the above are correct.
Which of the following would make the spending multiplier smaller?
A) a reduction in marginal propensity to save B) a small initial trade deficit C) a reduction in the marginal propensity to import D) a real appreciation E) none of the above
Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction
A) would be significantly less than if the owners of the smelter were legally liable for damages. B) would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. C) would be too small; the government would have to intervene to bring about an efficient outcome. D) would be the same as if it would be if the owners of the smelter were legally liable.