What would be an optimal tax on pollution (a negative externality)?
a) one for which producers internalize the cost of the pollution
b) one for which a benevolent social planner is able to maximize production
c) one for which producers choose not to produce any pollution
d) one for which the value to consumers at market equilibrium exceeds the cost of production (including tax)
Ans: a) one for which producers internalize the cost of the pollution
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as 
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting upward C. Short-run aggregate supply shifting downward D. Aggregate demand shifting leftward
Assuming that MPC is .75, equal increases in government spending and tax collections by $10 billion will
A. increase the equilibrium real GDP by $10 billion. B. reduce the equilibrium real GDP by $10 billion. C. increase the equilibrium real GDP by $2.5 billion. D. leave the equilibrium real GDP unchanged.
When the actual GDP equals the full-employment level of GDP, the
a. economy is in long-run equilibrium. b. price level must be rising. c. expected inflation must be zero. d. aggregate supply curve is not constrained by the scarcity of resources.
Higher interest rates tend to increase the demand for money.
a. true b. false