Unemployment insurance and welfare programs work as automatic stabilizers
a. True
b. False
Indicate whether the statement is true or false
True
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The directive of prompt corrective action means that
A) the FDIC will intervene earlier and more vigorously when a bank gets into trouble. B) the banks must take actions quickly to resolve reserve disputes. C) bank failures cannot occur. D) there must be an immediate response to an increase in interest rates.
Within the AD/AS model, an increase in capital formation that permits the economy to achieve a larger output will
a. increase long-run aggregate supply. b. increase short-run aggregate supply, but long-run aggregate supply will be unaffected. c. increase aggregate demand. d. decrease aggregate demand.
A consumer is willing and able to buy 100 units of a good at $100, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is
A) horizontal and is perfectly inelastic. B) horizontal and is perfectly elastic. C) vertical and is perfectly elastic. D) downward sloping from higher prices down to $10 and then horizontal.
Economist A.C. Pigou argued that to deal with a negative externality in production, the government should impose a tax equal to the cost of the externality. What did Pigou believe should be done in the case of a positive externality in consumption? How
would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality? What will be an ideal response?