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The Theory of Demand-Side Economics The Theory of Demand-Side Economics is an economic theory that focuses on the demand side of the economy, rather than the supply side. This theory was first developed by John Meynard Keynes in the 1930s

Answer: Expansionary Fiscal Policy Expansionary fiscal policy is when the government increases its spending or decreases taxes in order to increase economic demand and growth. This policy is typically used during economic downturns in order to stimulate the economy and

Answer: Contractionary fiscal policy involves decreasing government spending and/or increasing taxes in order to reduce aggregate demand, slow economic growth, and reduce inflation. Subsection 1 – How Does Contractionary Fiscal Policy Work? Contractionary fiscal policy is used to reduce aggregate

Answer: What is the Required Reserve Ratio? The required reserve ratio is the minimum amount of reserves that a bank must maintain as a percentage of its deposits. The Federal Reserve (the Fed) can increase or decrease the required reserve

Answer: True The Federal Reserve can increase government spending as a way to stimulate the economy. This is done by reducing taxes, increasing government purchasing, and increasing government transfers such as welfare and unemployment benefits. This type of monetary policy

Classical Economists and Government Interventions Classical economists believe that the economy is self-correcting and that government interventions are not necessary. They argued that the free-market system, which is underpinned by the principles of supply and demand, is self-regulating and that

Answer: The Federal Reserve puts coins and currency into circulation but is not responsible for making them This statement is true. The Federal Reserve is the central banking system of the United States and is responsible for conducting monetary policy,

What is the Discount Rate? The discount rate is the interest rate that the Federal Reserve (Fed) charges on loans of reserves to member banks. It is also known as the primary credit rate. How is the Discount Rate Used?

Answer The statement “The Fed is an agency of Congress and is subject to congressional regulation” is true. The Federal Reserve System (also known as the Fed) is an independent government agency that is subject to congressional regulation. The Fed

Most of the National Debt Owed to Foreign Entities The answer to the question is true. As of July 2020, according to the United States Treasury, almost 30% of the total US debt was held by foreign entities, including governments,

Answer The answer to the question is True. The federal budget becomes official when Congress passes the budget resolution. Background Information The federal budget is the annual spending plan of the US government, and it is officially established when Congress

Fiscal Policy and Aggregate Supply Fiscal policy is the government’s use of taxation and spending to influence the economy. It is an important tool that policymakers can use to influence economic activity, employment, and prices. Fiscal policy works by shifting

Effect of Higher Interest Rates on Consumers and Businesses Higher interest rates can have a profound effect on consumers and businesses alike. When interest rates increase, consumer borrowing costs increase, which can lead to a decrease in consumer spending, as

Answer Interest rates are important because they affect the cost of borrowing and the return on savings. When interest rates increase, the cost of borrowing increases, leading to decreased consumer and business spending. This, in turn, affects prices and real

The Federal Income Tax The federal income tax is a type of tax imposed by the federal government in the United States on the income of individuals, corporations, trusts, and other legal entities. The federal income tax is based on

What is a Regressive, Proportional, Progressive, or Flat Tax? A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. This is often seen in sales taxes, where

What is the Required Reserve Ratio? The required reserve ratio is the amount of money that a bank must hold in reserves against deposits made by its customers. Banks must keep a certain percentage of their total deposits in reserve,

The Laffer Curve The Laffer Curve suggests that an increase in the federal tax rate will eventually lead to a decrease in total tax revenue. This occurs when the federal tax rate becomes so high that it reduces the incentive

Answer Classical economists believe that the economy is self-correcting, and the government should not intervene. This is true. The Classical School of Economics The Classical School of economics was developed in the late 1700s and early 1800s. It was the

Answer The statement “The Federal reserve puts coins and currency into circulation but is not responsible for making them” is True. The Federal Reserve System is responsible for regulating the country’s money supply, but it does not produce or manufacture

Answer: What is the Main Difference Between ROA and ROIC? The main difference between Return on Assets (ROA) and Return on Invested Capital (ROIC) is that ROIC considers the working capital of a company while ROA does not. ROIC only

Answer: Price and Output Determination Under Perfect Competition Under perfect competition, price and output are determined by the market forces of supply and demand. The price is determined by the intersection of the demand and supply curves. The quantity supplied

Market Structure Salient Features Market structure is the number of firms producing identical products which are homogeneous. It is an important characteristic of any industry and affects the level of competition and pricing strategies. The salient features of market structure

Average Cost The average cost for a product or service varies greatly depending on a number of factors, such as the quality of the product, the location of the product, and the quantity purchased. It is important to do research

Extraction of Consumer Surplus Consumer surplus is the difference between what a consumer is willing to pay for a good or service and the price they actually pay. This represents the net benefit to the consumer. Policies that aim to

Answer: Price Elasticity in a Cournot Oligopoly Market The price elasticity of a Cournot oligopoly market is a measure of how responsive the quantity demanded is to changes in price. It is calculated by dividing the percentage change in the

Answer: Monopoly and the Demand Line A monopolist is a firm that has exclusive control over a market, meaning that it is the only seller of a particular good or service. As a result, the monopolist sets the price for

Answer: Answer: B. 30 utils. Marginal utility is the change in total utility that results from consuming one additional unit of a good or service. In this example, Joshua’s total utility from consuming three slices of pizza is 200 utils,

Answer: The Consumer Surplus is $0 Consumer surplus is the difference between the price a consumer is willing to pay for a good or service and the price they actually pay for it. In this case, Joshua’s consumer surplus is

Answer: The Price Elasticity of Demand The price elasticity of demand is a measure of the responsiveness of demand to a change in price. It reflects the degree to which a change in price affects the quantity of a good

Answer: Explicit and Implicit Costs in Accounting and Economics In accounting costs, Accountants include explicit costs as part of a firm’s costs. Explicit costs are costs that are paid out in cash, like labor, raw materials, etc. In economics, Economists

Answer The correct answer is B. 30 utils. The concept of marginal utility states that as the consumption of a good or service increases, the marginal utility or satisfaction decreases. This means that the fifth slice of pizza will have

Answer: External Benefits and Public Goods: Overcoming the Free-Rider Problem The free-rider problem is a situation in which people are unwilling to contribute to a public good or service, even though they benefit from it. To overcome this problem, there

Answer: Poverty and Public Policy: The Temporary Aid to Needy Families Program The Temporary Aid to Needy Families (TANF) program was established in 1996 as part of the welfare reform act and has been associated with an increase in poverty

Answer: The Trade-Off with a Minimum Wage The trade-off with a minimum wage is that some workers earn higher income, but others may lose their jobs. This is true; when the minimum wage is increased, it can cause unemployment as

Answer: Moral Hazard Moral hazard is a concept in economics, insurance, and risk management that states that an individual or entity is more likely to take risks when protected from the negative consequences of those risks. Examples of Moral Hazard

Answer: The Lemons Problem & The Experience Rating System The Lemons Problem refers to the situation when an insurance company is unable to accurately assess the risk of the people they are insuring. This can lead to an increase in

Answer: C. Female Headed Households According to the US Census Bureau’s 2018 report on poverty in the United States, the poverty rate for female-headed households is highest among all other households. The statistics show that 19.8% of female-headed households live

Answer: A The Lemons Problem is a situation in which a mixed market is characterized by demand that is positively sloped and supply that is negatively sloped. This means that the quantity of a good demanded increases as the price

Answer: The Lemons Problem The Lemons Problem is an economic concept that refers to the difficulty of distinguishing between good quality goods and bad quality goods in a market. This is due to what is known as adverse selection, which