Suppose Company A's profits increase by 10 million and nobody is made worse off. The CEO of Company A keeps all 10 million for herself. This situation
A) is definitely efficient.
B) is definitely not in the self-interest of Company A.
C) is definitely not in the social interest.
D) is definitely fair.
Question 2
The Ricardo-Barro effect says that
A) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government.
B) government budget deficits crowd out private investment and thereby lower the real interest rate.
C) government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment.
D) government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates.
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