What are the differences between public goods and private goods?
What will be an ideal response?
Public goods are
? nonrival, which means that consumption by one person doesn't decrease the quantity available for others people, and
? nonexcludable, so that a good is nonexcludable if everyone benefits from it regardless of whether they pay for it.
In contrast, private goods are
? rival, so that consumption by one person decreases the quantity available for other people and
? excludable, which means that only the people who pay for the good are able to enjoy its benefits.
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Assume perfect capital mobility and a fixed exchange rate system. Then, an increase in government spending would shift the
a. LM schedule to the left. b. BP schedule to the right. c. BP schedule to the left. d. IS schedule to the right.
If the substitution effect of a lowered price is partly or fully offset by the income effect, we know that the good in question is a(n)
a. complementary good b. inferior good c. luxury good d. normal good e. substitute good