Explain the major problems that occurred with the implementation of the SMP
What will be an ideal response?
There were problems with restructuring. Less efficient firms are squeezed out, and the more efficient ones grow; overall economic welfare expands as countries concentrate on what they do best, which inevitably means abandoning some industries and expanding others. A second major obstacle was the problem of harmonizing standards. A third difficulty was the issue of value-added taxes (VAT), which were difficult to harmonize, although the differences were reduced. Finally, it has been difficult to eliminate discrimination in public procurement of goods and services.
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If fiscal policy makers increase aggregate demand in an attempt to decrease the unemployment rate below the natural rate of unemployment, then: a. the potential GDP will decrease
b. the potential GDP will increase. c. the only lasting impact of the policy is a higher price level. d. the only lasting impact of the policy is higher real GDP. e. the only lasting impact of the policy is lower real GDP.
When the MPC gets smaller, the spending multiplier:
a. gets larger. b. gets smaller. c. stays the same. d. gets smaller at low real GDP, and larger at high real GDP. e. gets larger at low real GDP, and smaller at high real GDP.
If low-quality workers are unable to obtain a college degree, then a separating equilibrium can occur if
A) the cost of obtaining a degree is less than the wage premium paid to those who have obtained the degree. B) the cost of obtaining a degree is greater than the wage premium paid to those who have obtained the degree. C) the cost of obtaining a degree is zero. D) the wage premium paid to those who have obtained the degree is positive.
For inferior goods, a decrease in income will cause the
A. quantity demanded to increase. B. quantity demanded to fall. C. demand to increase. D. demand to fall.