If the economy is producing a level of output $45 billion above full-employment real GDP, the most viable option to shift the output to full-employment GDP would be a
A. tax cut of $45 billion.
B. tax increase of some amount less than $45 billion.
C. tax increase of some amount greater than $45 billion.
D. tax increase of $45 billion.
Answer: B
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If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the
a. law of supply. b. law of demand. c. difference between normal and inferior goods. d. difference between substitute and complement goods.
In the real world, wage negotiations typically do not drag on for years:
A. because the company can simply offer the split that would eventually occur if the two sides played all the rounds. B. unless the employees play an ultimatum game using a union to negotiate. C. because neither a company nor employees can afford to not work for that long. D. None of these statements is true.
A country will have a balance-of-payments deficit when its exchange rate:
A. is flexible. B. is overvalued. C. equals the market equilibrium value. D. is undervalued.
Some modern theories of consumer behavior have:
A) emphasized that consumption is basically an instantaneous act. B) contended that in the MUx/Px = MUy/Py equation MU is understated for time-intensive goods. C) introduced the opportunity cost of time as a component of product price. D) argued that inflationary expectations negate the theory of consumer behavior.