If food is on the vertical axis and shelter on the horizontal axis, then the equation for the budget line can be expressed as
A. M/Ps = S.
B. PsS + PfF = M.
C. PsS + PfM = S.
D. PsF + PfS = M.
Answer: B
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Use the following information to answer the question below. It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment. In the situation described above, we would expect an
A. underproduction of paper in the mills. B. overproduction of paper in the mills. C. attainment of allocative efficiency in the market. D. external cost resulting from the production of hydroelectric power.
When negative externalities exist in a market, if the producers are forced to pay a Pigouvian tax then:
A. those who interact in the market will lose surplus. B. those who interact in the market will gain surplus. C. producers will gain surplus. D. those who do not interact in the market but are affected by the externality will lose surplus.
Stock prices change with surprises
Indicate whether the statement is true or false
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and real GDP rises. b. The real risk-free interest rate falls, and real GDP stays the same. c. The real risk-free interest rate rises, and real GDP remains the same. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate falls, and real GDP falls.