Cost-benefit analysis is important to determine the role of government in our economy because
a. the government should provide all goods for which the benefits exceed the costs.
b. cost-benefit analysis identifies the possible gains to society from government provision of a particular good.
c. markets for private goods cannot effectively assign costs and benefits.
d. cost-benefit analysis is the best tool to identify market failures.
b
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If rational expectations cause people's price expectations to be generally correct, active policy will influence the price level but not output
a. True b. False Indicate whether the statement is true or false
In the aggregate expenditures model, if an economy operates above equilibrium GDP, there will be:
a. unplanned inventory depletion. b. an increase in GDP. c. an increase in employment. d. a decrease in GDP.
Ceteris paribus, a decrease in the demand for automobiles will
a. increase the price of automobiles. b. increase the quantity supplied of automobiles. c. decrease the demand for automobile workers. d. increase the demand for automobile workers.
In order to construct a more complete picture of the economic burden of government across income classes, economists usually
a. include tax payments as well as transfer payments received. b. focus only on the tax payments of wealthy tax payers. c. limit their analysis to taxes based on the ability-to-pay principle. d. focus their analysis on issues of tax efficiency.