Those who believe that the federal government should make it a priority to balance its budget argue that
A. Running a budget deficit is never justifiable.
B. Budget deficits cause real interest rates to be too low.
C. Government debt incurred today will lower the living standards of future generations.
D. Government debt held in private hands is a danger to national security.
E. Taxes should always be assessed at the level of aggregate demand.
Ans: C. Government debt incurred today will lower the living standards of future generations.
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Unions face a trade-off between higher wages and
A) fewer available positions. B) more available positions. C) equipment. D) none of the above.
Each of the following is an example of moral hazard in which people modify their behavior in an opportunistic way, often frustrating the intent of governmental or management policies. Which is NOT an example of moral hazard?
a. After a firm gets a loan from a bank to purchase inventory, the borrower instead decides to use it to invest in call options on stocks. b. Based on motorcycle accident data, a state passes a law requiring motorcyclists to wear helmet, but then the motorcyclist wearing helmets start to drive faster and more recklessly. c. Bank and nonbank mortgage lenders make money granting loans. But the Government through Freddie Mac and Fannie Mae decides to purchase these loans. The mortgage lenders find that they earn a fee for each mortgage that they grant and then sell to Freddie Mac or Fannie Mae. Since they never intended on holding on to the mortgage, the mortgage granters are not too particular on whether the customer can really pay it back. The lowest quality loans are sold to the Government. d. A fellow buys a $1 million life insurance policy and then travels to Nepal to climb Mount Everest. e. A student learns that if he or she reads the chapter and studies lecture notes, the student does better on the next test.
Louise Bakery sells cupcakes that have an equilibrium price of $5.00 per cupcake and an equilibrium output of 300 cupcakes. Which of the following is likely to be true when the government imposes a tax of $0.75 per cupcake? a. Producer and consumer surplus will increase. b. Producer and consumer surplus will decline. c. Equilibrium price will decrease
d. Equilibrium output will increase.
In which of the following economic theories is it possible for an increase in the money supply to lead to a decrease in Real GDP in the short run?
A) Keynesian theory B) Monetarist theory C) New classical theory D) a and b E) a and c