Homework Clinic
Social Science Clinic => Economics => Topic started by: 2125004343 on Jun 30, 2018
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The U.S. sugar quota
A) generates government revenue.
B) results in net welfare benefits to the U.S. economy.
C) results in benefits to sugar producers that exceed the cost to consumers.
D) results in costs to consumers that exceed the benefits to sugar producers.
E) does not result in an efficiency loss.
Question 2
Explain how does a rise in real income affect aggregate demand?
What will be an ideal response?
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Answer to Question 1
D
Answer to Question 2
A rise in domestic real income, Y, leads to a rise in disposable income, Yd. This raises the spending on imports, IM, thus lowering the current account, CA, and reducing aggregate demand, AD. However, the rise in Yd also causes a rise in consumption, C, and raises aggregate demand, AD, by more than the corresponding decrease.