If a nation imports a good that can be domestically produced, what happens to the quantity consumed of the good and why?
A) The quantity consumed increases because the market price increases.
B) The quantity consumed increases because the market price decreases.
C) The quantity consumed remains constant because the price is unchanged.
D) The quantity consumed decreases because the market price increases.
E) The quantity consumed decreases because the market price decreases.
B
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Refer to the above figure. Suppose that the economy starts at AD1. If the government reduces taxes, then the economy goes to AD2, but then falls back to AD1. This is an example of
A) laissez-faire. B) partial crowding-out effect. C) the free rider problem. D) complete crowding-out effect.
Suppose the marginal propensity to consume is 0.75. A $150 billion increase in government spending shifts the IS curve
A) to the right by $50 billion. B) to the left by $50 billion. C) to the left by $600 billion. D) to the right by $600 billion.