How would the following events affect the market demand for laser printers?
a) A recession in the economy leading to a fall in income levels
b) A five-fold increase in the price of printing paper
What will be an ideal response?
a) A recession in the economy that causes a fall in income levels will cause a fall in the overall demand in the economy including a fall in the demand for laser printers. This will be represented by a left shift in the demand curve for laser printers.
b) Printing paper and laser printers are complements. Therefore, a fivefold increase in the price of printing paper will make printing more expensive and subsequently reduce the demand for laser printers. This will be represented by a left shift in the market demand for laser printers.
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All of the following make the use of fiscal policy less attractive EXCEPT
A) expansionary fiscal policy tends to cause inflation and offsets some of the increased consumer spending. B) that it cannot be effective, unless it is accommodated with expansionary monetary policy. C) the substantial margin of error in the value of the multiplier. D) the legislative lag, which is the time it takes for Congress and the President to pass and implement the measure. E) the crowding out effect, which is the decrease in private spending that occurs due to increased government spending.
Which of the following government outlays would be classified as a transfer payment?
A) payments of veterans benefits under the GI bill B) interest on the federal debt C) subsidies to gold-mining firms D) all of these