Which of the following is not a reason to expect the slope of a consumer's indifference curve for current and future consumption to be greater than 1 with an endowment along the 45° line?
a. People are naturally impatient.
b. One is never sure if he will be alive in the future.
c. A unit consumed today offers memories of consumption into the future.
d. A decline in interest rates.
d. A decline in interest rates.
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According to the Net Present Value (NPV) rule, managers choose to invest if
a. The NPV of the project is less than zero b. The NPV of the project is greater than zero c. The NPV of the project is equal to zero d. The NPV of the project is equal to the cost of capital
Suppose the president is successful in passing a $10 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.8. What happens to equilibrium GDP?
A) There is a $50 billion increase in equilibrium GDP. B) There is a $40 billion increase in equilibrium GDP. C) There is a $40 billion decrease in equilibrium GDP. D) There is a $50 billion decrease in equilibrium GDP.
The equation for the spending multiplier is:
a. 1 / (1 ? MPC). b. 1 ? MPC. c. 1 ? (MPC ? MPS). d. MPC / MPS. e. none of these.
In the absence of externalities, which of the following is true of economic efficiency?
a. It occurs where marginal costs of production equal marginal benefits of consumption. b. It occurs where quantity supplied is equal to quantity demanded. c. It maximizes the total net benefits to consumers and producers. d. All of the above. e. None of the above.