Correct. Perfect competition and oligopoly are characterized by homogeneous/standardized product differentiation. Market Structure Degree of Product Differentiation Perfect competition Homogeneous/ standardized Monopolistic competition Differentiated Oligopoly Homogeneous/ standardized Monopoly Unique product CFA Level I "The Firm and Market Structures," by Richard G. Fritz and Michele Gambera Section 2.2 Question 3 of 30 In a hypothetical economy, consumption is 70% of pre-tax income, and the average tax rate is 25% of total income. If planned government expenditures are expected to increase by $1.25 billion, the increase in total income and spending, in billions, is closest to: $2.6. $4.2. $1.3. Incorrect. The fiscal multiplier is where C marginal propensity to consume = consumption ÷ disposable income T the tax rate Assuming pre-tax income of $100 Disposable income $100 × (1 – 0.25) = $75 Marginal propensity to consume $70 ÷ $75 = 0.933 The fiscal multiplier 1÷ [1 – (0.933 × (1 – 0.25))] = 3.33 With government expenditure of $1.25 billion, total incomes and spending will rise by $1.25 Billion × 3.33 = $4.2 Billion
CFA Level I “Monetary and Fiscal Policy,” Andrew Clare and Stephen Thomas Section 3.2.2 Question 4 of 30 If a central bank reduces the money supply, this move will most likely lead to a: rise in nominal interest rates and a decline in aggregate price level. rise in nominal interest rates and a rise in aggregate price level. decline in nominal interest rates and a rise in aggregate price level.
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