Question
Assume that the consumption function is given by
C
= 200 + 0.7(
Y
–
T
), the tax function is given by
T
= 100 +
t
1
Y
, and
Y
= 50
K
0.5
L
0.5
, where
K
= 100 and
L
= 100. If
t
1
increases from 0.2 to 0.25, then consumption decreases by:
Answer
70.
140.
175.
250.
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Question
Assume that the consumption function is given by
C
= 200 + 0.7(
Y
–
T
), the tax function is given by
T
= 100 + 0.2
and
Y
= 50
K
0.5
L
0.5
, where
K
= 100. If
L
increases from 100 to 144, then consumption increases by:
Y
,

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Question
Investment goods as measured in the GDP are purchased by:

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Question
Total investment in the United States averages about ______ percent of GDP.

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Question
Other things equal, an increase in the interest rate leads to:
Answer
a decrease in the quantity of investment goods demanded.
no change in the quantity of investment goods demanded.
an increase in the quantity of investment goods demanded.
sometimes an increase and sometimes a decrease in the quantity of investment goods demanded.

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Question
When economists speak of “the” interest rate, they mean:
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Question
Assume that a firm wants to build a factory that will cost $5 million. It believes that it can get a return of $600,000 in one
year and then can sell the used factory for its original cost. The rate of return on this investment would be:

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Question
Assume that a firm is considering building a factory that will cost $5 million. It believes that it can get a profit from this
factory of $600,000 per year for many years. The interest rate at which the firm can borrow money is 15 percent. After
evaluating whether it should build the factory, the firm decides that it should:

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