Briefly explain how most economists feel about a total equal redistribution of income.
What will be an ideal response?
If some income redistribution is good, why not go all the way and completely
equalize everyone’s income, taxing the rich extremely heavily and giving massive
subsidies to the poor? Nearly all economists oppose that scenario because our incomes
would all be equal but much smaller, providing little incentive to work, invest, and save.
Why help make the economic pie (total output) if they will give you a piece if you don’t
work? Who would take on the risky jobs if everyone were paid the same? Why would
you go to school if your investment in human capital was so low? Most economists
believe, for efficiency and equity (fairness) reasons, that there ought to be some limits
on redistributive efforts.
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The implementation lag is
A) the time it takes for policy makers to obtain data indicating what is happening in the economy. B) the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy. C) the time it takes to pass legislation to implement a particular policy. D) the time it takes for policy makers to change policy instruments once they have decided on the new policy. E) the time it takes for the policy actually to have an impact on the economy.
Price elasticity of demand and price elasticity of supply are both influenced by
a. the availability of close substitutes for the product b. the proportion of the consumer's budget spend on the product c. the length of the adjustment period considered d. technological conditions such as the additional costs of increasing production e. none of the above
An increase in aggregate demand, say, from an increase in our exports to Canada, results in
a. deflation b. demand-pull inflation c. stagflation d. cost-push inflation e. a recession
______ is the cost of inputs whose use does not vary as the firm's output changes.
A. Sunk cost B. Fixed cost C. Total cost D. Explicit cost