A "prisoner's dilemma" can arise when:
a. two large countries simultaneously and independently apply tariffs on imports from each other.
b. two large countries simultaneously and independently eliminate tariffs on imports from each other.
c. one large country eliminates tariffs on imports from another large country.
d. one small country eliminates tariffs on imports from a large country.
Ans: a. two large countries simultaneously and independently apply tariffs on imports from each other.
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For this reason, the multiplier effects of changes in taxes and transfer payments are smaller than the multiplier impacts of government spending.
What will be an ideal response?
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
A) complements in consumption. B) both luxury goods. C) both inferior goods. D) substitutes in consumption.