If current aggregate expenditure equals current production, an economy is in equilibrium.

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

A) by 10 percent B) by 20 percent C) by 25 percent D) by 50 percent

Would you rather receive $100 in eight years paying an interest rate of 10% or be given 48 dollars today?

A) I would rather receive 48 dollar today. B) I would rather receive $100 in eight years. C) I am indifferent between the two options. D) I cannot determine which I would prefer.