Marginal costs reflect changes in variable costs.
Answer the following statement true (T) or false (F)
True
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A major objective of tax policy should be to
a. avoid distortions in resource allocation while raising revenue b. divert savings from the private to the public sector c. increase the government's ability to direct the economy d. supplement resources entering the country from foreign aid e. all of the above
Do the real effects of aggregate demand shocks differ in the short run and long run in the Keynesian sticky-price model from the effects of these shocks in the classical model of perfectly flexible prices? Briefly explain
What will be an ideal response?
Assume that the Fed increases the money supply when there is substantial unemployment in the economy. According to the quantity theory of money, if velocity is constant, then:
a. the price level will decrease. b. real GDP will decrease. c. nominal GDP will increase. d. nominal GDP will decrease. e. real GDP will remain constant while price level will decrease.
Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate. Which bond has a higher credit risk?