Higher interest rates:
a) increase consumption and investment spending.
b) decrease consumption and increase investment spending.
c) decrease consumption and investment spending.
d) increase consumption and decrease investment spending.
Ans: c) decrease consumption and investment spending.
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During periods of unemployment
A) the economy operates at a point inside the production possibilities curve. B) the economy operates at a point outside the production possibilities curve. C) the production possibilities curve shifts inward. D) the production possibilities curve shifts outward.
With defined property rights, an externality
A) can only be corrected with government intervention. B) will not lead to a misallocation of resources. C) may be internalized with voluntary contracting, under certain circumstances. D) must lead to society producing inside its production possibilities frontier.