Which economic question does the decision to produce butter instead of guns answer?
a. What to produce?
b. How to produce?
c. For whom to produce?
d. Who has a comparative advantage in gun production?
e. Who has an absolute advantage in butter production?
A
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One reason why soda companies are so fervently against this tax might be because they assume sellers will pay the entire tax. Sellers will pay the entire tax if
A) demand is perfectly inelastic. B) the price elasticity of demand is between zero and 1. C) demand is unit elastic. D) demand is perfectly elastic.
Why is fiscal policy less effective in an open economy than in a closed economy?
a. Expansionary fiscal policy raises demand for imports, which reduces aggregate demand. b. Expansionary fiscal policy raises interest rates, which raises the value of the currency, and reduces aggregate demand. c. Expansionary fiscal policy raises the value of the currency, which reduces demand for exports. d. Expansionary fiscal policy has all the above effects.