A person's real income will increase by 3% if her nominal income increases by
A. 5% while the price index falls by 2%.
B. 5% while the price index rises by 2%.
C. 2% while the price index falls by 5%.
D. 2% while the price index rises by 5%.
Answer: B
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The figure above shows the supply curve for soda. The market price is $1.00 per soda. The producer surplus from the 20,000th soda is
A) $0.00. B) $0.50. C) $1.00. D) more than $1.00. E) None of the above answers is correct.
Which of the following statements is not correct?
a. Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. b. Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. c. Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. d. Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment.
Asymmetric information poses two important obstacles to the smooth flow of funds from savers to investors. They are:
A. adverse selection and moral hazard, both of which occur after the transaction. B. moral hazard, which arises before the transaction occurs, and adverse selection, which occurs after the transaction. C. adverse selection, which arises before the transaction occurs, and moral hazard, which occurs after the transaction. D. adverse selection and moral hazard, both of which occur before the transaction.
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease