Suppose that this graph describes the current labor market for high school teachers:
If the wage is w*, then:
A. there will be a surplus of certified teachers.
B. there will be neither a shortage nor a surplus of certified teachers.
C. teachers will be underpaid.
D. there will be a shortage of certified teachers.
Answer: B
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When aggregate demand is high, risking higher inflation, those in favor of using monetary and fiscal policy to stabilize the economy might recommend
a. increasing government spending. b. expanding the money supply. c. lowering taxes. d. the Fed sell government bonds.
Decreasing government spending and and an oil embargo will both have an effect towards increasing the price level.
Answer the following statement true (T) or false (F)
In the short-run, if the Federal Reserve decreases interest rates, then consumption and investment ________, aggregate expenditure ________, and short-run equilibrium output ________.
A. increase; increases; increases B. increase; increases decreases C. decrease; decreases; decreases D. increase; decreases; decreases
Which of the Ten Principles of Economics does welfare economics explain more fully?
a. The cost of something is what you give up to get it. b. Rational people think at the margin. c. Markets are usually a good way to organize economic activity. d. People respond to incentives.