The slope of the consumption function shows how:
a. consumption changes over time.
b. consumption changes as household size changes.
c. consumption changes as the price level changes.
d. income changes as the level of consumption changes.
e. consumption changes as the level of income changes.
QUESTION 2Negative externalities impose most of their costs:
a. directly on consumers of polluting processes.
b. whenever individual health is harmed in the production process.
c. only in large cities.
d. on individuals other than consumers of the polluting product.
QUESTION 3Banks minimize the risk of loss to depositors by:
a. lending to government officials.
b. making many different loans to different borrowers.
c. refusing to lend money to the U.S. government.
d. lending to the richest 1 percent of the population.
e. making very long-term loans.
QUESTION 4If income increases by 100 and saving increases by 25, the slope of the consumption function equals _____.
a. 1/4
b. 1/5
c. 1/2
d. 3/4
e. 3/5
QUESTION 5Suppose a state discovered chemical compounds in their water. The source of these chemicals is the waste discharges of industrial plants in another state. This is an example of a(n):
a. market failure where the market price of the output of these industrial plants does not fully reflect the social cost of producing these goods.
b. external cost imposed by the industrial plants of another state.
c. externality where the marginal social costs of producing these industrial goods differ from the marginal private costs.
d. all of these.
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