Which of the following is NOT an assumption of the classical system?
A) Wages and prices are inflexible. B) Pure competition exists.
C) There is no money illusion. D) People are motivated by self interest.
A
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If the tax elasticity of supply is 0.6 and tax rates increase by 10 percent, the quantity of labor supplied will
A. Decrease by 1.67 percent. B. Increase by 6 percent. C. Decrease by 6 percent. D. Increase by 1.67 percent.
A change in the exchange rate for a country's currency alters the prices of
A. Imports only. B. Exports only. C. Both exports and imports. D. Only domestic goods and services.
Most economists have reached the following conclusion about supply-side economics.
A. Supply-side tax cuts are likely to reduce income inequality. B. Supply-side tax cuts are almost certain to lead to smaller budget deficits. C. Supply-side tax cuts are likely to widen income inequality. D. None of these.
Refer to the above diagram. Assume that G and T1 are the relevant curves, the economy is currently at A, and the full-employment GDP is B. This economy has:
A. neither a surplus nor deficit in the actual budget. B. a cyclically adjusted budget deficit. C. an actual budget deficit. D. an actual budget surplus.