What will happen to unemployed retail workers if the government is unable to target stimulus spending at the retail sector?
A. Most will become discouraged and leave the labor force.
B. They may eventually find work after government spending works its way through the economy.
C. They may eventually find work after the Fed reduces tax rates, increasing household consumption spending.
D. They will remain permanently unemployed unless they find work in another sector of the economy.
Answer: B. They may eventually find work after government spending works its way through the economy.
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Charging a polluter a fee for each unit of pollution released is an example of
a. the market approach to environmental policy b. the polluter-pays principle c. the command-and-control approach to environmental policy d. (a) and (b) only
The Keynesian cause-and-effect sequence predicts that an increase in the money supply will cause interest rates to:
A. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. B. fall, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP. C. rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP. D. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
The idea that people will substitute cheaper commodities for more expensive commodities is called
A. the marginal effect. B. the utility effect. C. the substitution effect. D. the real-income effect.
Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was:
A. $195 B. $30 C. $215 D. $185