In the classical model, a shift to the right in aggregate demand would result in
A. an increase in the price level.
B. a permanent increase in unemployment.
C. a permanent shift past full employment.
D. a permanent increase in real incomes.
Answer: A
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Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?
A) removing property rights B) subsidizing production C) marketable permits D) lottery E) vouchers
If the federal government balanced its budget, its tax revenues would be equal to its expenditures.
Answer the following statement true (T) or false (F)
A Pigouvian subsidy
A. cannot exist with externalities. B. is the same thing as a Pigouvian tax. C. is measured in terms of Pigouvian dollars. D. moves production to the socially optimal level of output.
If trade is mutually beneficial, then increasing trade
A. Reduces income for workers in export industries. B. Makes countries less interdependent. C. Leads to increased output in export industries. D. Increases the welfare of producers that compete with importers.