If aggregate demand equals aggregate supply, macroeconomic equilibrium exists
a. True
b. False
Indicate whether the statement is true or false
True
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"Supply creates its own demand" implies that
A) the very act of supplying a particular level of goods and services will not necessarily equal the level of goods and services demanded. B) the very act of demanding a particular level of goods and services necessarily equals the level of goods and services supplied. C) the very act of supplying a particular level of goods and services necessarily equals the level of goods and services demanded. D) the government will buy up any surplus of goods and services in a country to avoid economic problems.
The ________ of the 1968 tax surcharge led to the prominence of the developer of the permanent-income hypothesis that predicted it, ________
A) success, Walter Heller B) success, Milton Friedman C) failure, Walter Heller D) failure, Milton Friedman
Suppose there is a water shortage, and the governor proposes that the government distribute equal quantities of water to each person at no cost to the consumers
If consumers were forbidden to trade water, would such a distribution be Pareto optimal? A) Yes, because each person has the same amount of water as everyone else. B) Yes, because everyone would be receive their water for free. C) Not necessarily, as people may differ in their marginal rates of substitution between water and other goods. D) It is impossible to determine without knowing the price of water. E) none of the above
Suppose the installation of sound absorbing materials in the walls of an auto body shop would cost $4,000, and would generate $25,000 in increased property values for an adjacent neighbor. Completely reducing all noise would require extensive retrofitting, costing $100,000, and would generate $30,000 increase in property values for the adjacent neighbor. Thus there are net social benefits to
installing the sound-absorbing materials. Which of the following would be consistent with the Coase Theorem? a. If the area is zoned industrial and the shop has the right to emit noise, the efficient solution would be realized if the two parties negotiated and the neighbor bought sound-absorbing materials for the shop. b. If the area is zoned industrial and the shop has the right to emit noise, the efficient solution would be realized when the neighbor appealed to the EPA for regulations requiring zero noise emissions and thus complete retrofitting of the shop. c. If the area is zoned residential, and the neighbor has the right to a relatively quiet environment, the efficient solution would be realized by requiring the shop owner and the building owner to share the cost of reducing noise emissions to zero. d. If the area is zoned residential, and the neighbor has the right to a relatively quiet environment, the efficient solution would be realized by requiring the neighbor to completely retrofit the building to reduce noise emissions to zero.