According to the classical system, a decrease in the income tax rate reduces the after-tax real wage
a. and shifts the labor supply schedule to the right.
b. and shifts the labor supply schedule to the left.
c. without shifting the labor supply schedule.
d. None of the above
A
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In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true?
A) These price controls caused a chronic excess supply of natural gas. B) Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium. C) Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium. D) This episode of price controls was unusual, because it resulted in no deadweight loss to society.
In events leading to the housing bubble, investment banks on Wall Street made money through the housing market by:
A. buying as many loans as possible to create mortgage-backed securities. B. relying on banks to sell as few high-risk mortgages as possible. C. ensuring local banks were making good loans. D. offering low interest loans to those with very good credit.
If the Fed wishes to slow economic activity, it might actively pursue:
A. contractionary fiscal policy. B. expansionary monetary policy. C. expansionary fiscal policy. D. contractionary monetary policy.
?Assume the economy is in short-run equilibrium at a real GDP above its potential real GDP. According to classical theory, which of the following policies should be followed?
A. ?The Federal Reserve should use open market operations and buy U.S. government securities. B. ?The Federal Reserve should not follow a fixed rule. C. ?The federal government should cut taxes. D. ?Fiscal policy and monetary policy should not be activist.