In a two-period model, government spending is financed through
A) taxes and transfer payments.
B) taxes and issuing debt.
C) taxes and redeeming debt.
D) taxes only.
B
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Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium
What will be an ideal response?
Suppose Canon Inc decided to invest 45 billion yen in developing and launching a new model of its digital camera, expecting that it will bring additional sales of 60 billion yen
The company has already invested 38 billion yen when the marketing department suddenly finds out that the introduction of a similar camera by Sony will reduce Canon's expected additional sales to 30 billion yen. The company's management is trying to decide whether to continue investing in the new product or close the project. Canon hires you as an economic consultant. So, think like an economist to help the company's management make their decision: a) At this point in time, what is Canon's marginal cost of introducing the new product? b) What is Canon's marginal benefit from introducing the new product? c) Will you advise Canon to finish the project and introduce the new product? Why or why not? What principles of economic thinking will help you analyze the situation and make the right choice?